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Occupancy rates up to 84 per cent, says Knight Frank report

UK care home operators have seen a five per cent rise in occupancy levels and an increase in profitability, according to property adviser Knight Frank.

Its 2022 UK Care Homes Trading Performance Review points to recovery from the pandemic and strong demand for beds.

Occupancy rates across the UK are said to average up to 84.3 per cent in comparison to last year’s 79.4 per cent. Demand for beds has also seen average weekly fees increase by 3.3 per cent year-on-year to £980 per week. Some homes are already trading at pre-pandemic levels, according to the report.

Sector-wide EBITDARM (Earnings before interest, taxes, depreciation, amortization, rent, and management fees) as a percentage of income has modestly increased to 26.3 per cent demonstrating the sector’s strong underlying fundamentals and resilience. However, the report also highlights the significance of government and regulatory support in both the long and short-term support of the sector.

Knight Frank’s research also highlights vast disparities between the profitability relative to care standards and size. Homes with an ‘inadequate’ CQC rating traded at a margin of 22 per cent in comparison to homes with an ‘outstanding’ rating which traded at a 34 per cent margin. The report reveals that the most profitable size range is homes between the size of 60 to 100 which trade at approximately 29 per cent.

The report highlights possible future pressure on margins caused by increased scrutiny on energy price rises, labour costs and legislation. Currently, average costs of utilities at a UK care home are around £58,000 annually and there have been hikes in the costs of property and food of 40 per cent and 15 per cent respectively.

Thereport, which collates data from across the UK care home sector and surveys operators on their individual performance, represents approximately 79% of the corporate market totalling over 100,000 beds across 781 towns and cities.

Julian Evans, head of healthcare at Knight Frank, said: “Whilst we do remain optimistic on its outlook, the sector will be leaning on a combination of its operators, investors, developers, lenders, and local government to maintain its resilience through the next 12-24 months.”

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