Knight Frank predicts national crisis in care home industry

Leading property consultancy Knight Frank predicts the UK is facing a national crisis in care bed provision, with the last 12 months representing a stern test for the UK healthcare market.

According to their latest research report, Care Homes Trading Performance Review, operators have needed to react to staffing challenges ahead of Brexit. They have also had to contend with an acute shortage of qualified nurses, the introduction of, and subsequent increase in, the National Living Wage, and price inflation on raw materials.

Knight Frank says the UK care market is facing an imminent crisis as the sector struggles to cope with a national shortage of beds, which will be exacerbated by an over 65 population that is forecast to rise from 11.6 million to 12.9 million by 2021. Eighty five per cent of existing care home stock is over 50 years old and is becoming less and less fit for purpose with the result that demand is already outstripping supply in the care home market.

Julian Evans

Julian Evans, head of healthcare, Knight Frank, commented: “The UK healthcare industry is very immature and requires huge investment just to keep up with present demand, never mind the future. With medical advances and an ageing population the UK does not have the facilities to cope with the requirements that this part of society is going to need going forward.

“The entrenched crisis in UK care home bed provision shows no sign of abating. The issue will be further exacerbated as the baby boomer generation ages at a faster rate than new care homes can be developed. 2016 brought an annual net loss in UK care homes and beds of 11% and 5% respectively. We expect this to get worse, as our research estimates that circa 6,600 care homes are at risk of closure over the next 5 years, which equates to 140,000 beds. It will cost approximately £15 billion to build the new homes to replace these beds.

“This national crisis in provision is placing greater pressure on the government to provide sufficient funding for social care and encourage local authorities to support care home development in order to speed up the rate of delivery. However we are only going to solve the problem by getting private equity to invest in the market. Our research estimates that there is c£3.5 billion of UK private equity and c£20 billion of overseas private equity looking to enter the care home market. We need to utilise this now otherwise the crisis will become a full blown disaster.”

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