The Covid-19 pandemic has highlighted the importance of the social care sector and particularly, the role that care homes play in supporting the NHS. So why aren’t developers and investors seizing on this demand (and possible return opportunities) in the way that they did, for example, in relation to student housing? Whilst the reasons are complex and varied (and there are too many to list in a blog post!) one of the key reasons is finding suitable sites for development.
The care homes of bygone days were predominately refurbished large houses (typically in out-of-town locations). These are now viewed by investors as tertiary stock that is now outdated, too small and ultimately not fit-for-purpose especially in a post-pandemic world. In fact, Knight Frank’s recent Healthcare report identifies 6,500 of these homes at risk of closure in the next year. Investors want to see purpose built “Super Prime” facilities with flexible, future proof designs that are easy to access, have around an acre of land and are near to centres from which to draw a talented workforce. This criteria fits sites that are in high demand, but short in supply, and not found on your typical brown field housing development site!
So what is the answer? Well, with a well-documented decline of the retail market, hotel market (PwC stating that hotels will take four years to recover to pre-covid levels) and the automotive market (the BBC calling last September’s results for new car registrations the worst September this century!) could we see a repurposing of edge of town retail, automotive and hospitality/leisure sites as an opportunity for care home developers/investors?
Think about it. An average car dealership site has great transport links (usually on a main road), over an acre of land and are usually close to centres to capitalise on accessibility – this was highlighted at the recent Health Investor Virtual Summit. The same is true of small retail parks and some older hotels. As distressed assets inevitably start to enter the market and developers look for opportunities, it may be time for them to think outside the box in terms of their instructing criteria to agents. Local authorities are keen to see redevelopment of sites rather than vacant land and all have bed targets imposed by central government that they will also be keen to meet – leading to more sympathetic conversations with planning authorities. Specialist healthcare architects are already working on future proof flexible designs that don’t fit your standard “H” or “L” shape construction, meaning fitting a care home into a more unique site is a welcome challenge rather than a no-go.
One of the many things the Covid-19 pandemic has taught us is that we were woefully under prepared to deal with a national healthcare crisis. If we don’t act now, what has often been dubbed the “Cinderella sector” to the NHS will not be ready to face the looming national bed crisis. Significant investment in the coming years is required in the social care sector of care homes and senior living in order to meet the demand that will be placed on its shoulders. Perhaps the sector needs its own “Fairy Godmother” developer/investors to think outside the box and instead of turning pumpkins into coaches to turn surplus car forecourts, hotels and retail premises into the pandemic proof care homes of the future.
If you would like to discuss any of the issues raised here do get in touch with myself or a member of our real estate investment team and/or health and care team.