The NHS’s plan for 250 neighbourhood health centres hinges on private investment but, as Jennifer Lewis, real estate partner at Mills & Reeve, argues, unlocking strong investor appetite will require a more commercially viable model and a clearer route through the system.
Health centres are a recession proof investment with secure returns supported by NHS funding; however, often the intricacies and nuances of working within the NHS system discourages investors. Breaking down these barriers will be key to realising the ambitious NHS plan for 250 new health centres by 2035 while also opening opportunities for investors.
Hospital to community
The government’s 10 Year Health Plan for England centres on a fundamental “left shift” in care, moving activity away from hospitals and into community settings, with the aim of providing more preventive, joined up and accessible services closer to where people live. This model seeks to end “hospital by default”, reduce pressure on acute services, and enable hospitals to focus on complex and specialist care, while multidisciplinary neighbourhood teams deliver more routine, proactive and long term care locally.
250 neighbourhood health centres
A key element of this strategy is the rollout of 250 neighbourhood health centres (NHC), which will act as local hubs bringing together a wide range of services, including GP care, diagnostics, mental health, rehabilitation and social care reducing unnecessary hospital visits and enabling more personalised care within communities.
NHS Property Services (NHSPS) have already been very clear that the first step is optimisation of the existing estate to enable accelerated delivery with 27 NHCs envisaged by 2027. Where the locality does not have any suitable buildings (and this may be one building or a cluster or a hub and spoke model) then new builds will be considered.
How have new health centres been delivered in the past?
Health centres have typically been delivered by third-party developers, GP-led schemes, NHS owned properties and around twenty years ago, through a privately financed model similar to PFI - NHS LIFT (Local Improvement Finance Trust).
However, for the past few years development of health centres has slowed due to difficulties in getting the costs of building to stack up against the returns. Although there is a secure return (in the form of rent reimbursement) the levels of rent are constrained by the requirements of the NHS Premises Cost Directions.
It is widely recognised that significant barriers remain to investment in the primary care estate. In September 2024, the British Property Federation (now RE:UK) highlighted these challenges in its report Building Healthy Futures: Strengthening our Healthcare Estates, identifying the absence of a system-wide approach and accounting rules that constrain NHS capital investment as key barriers. It is clear the combination of IFRS 16 and capital spending constraints presents challenges, often requiring alternative approaches to transaction structuring, alongside the additional cliff-edge pressures associated with the NHS financial year end.
Refurbishment, extension and upgrade
NHSPS recently released figures to say that some buildings in the primary care estate are only utilised 40% of the time. Aside from the fact this underutilised space might be in the wrong area (and many GP practices will be bursting at the seams) the other issue is the lack of ongoing investment in some of these premises which often require significant refurbishment and, where space allows, extension.
There is an opportunity for investors who are willing to engage in the refurbishment and extension of existing premises as it is often the case that practices can agree new lease terms to reflect the investment. Lease terms for health centres are typically 20 plus years giving good security and a reliable rent return over this period.
A new form of PPP?
NHS England has confirmed that they are looking at a new form of PPP to deliver some of the NHCs and we expect more detail when they go out for market engagement in the Autumn (as confirmed at the recent NHS Confederation conference). What this will look like is currently unconfirmed, but it is promised that it will address some of the issues with the LIFT programme. These included perceived high costs and often underutilised buildings.
However, a PPP scheme usually requires a substantial estate to make the numbers stack up and many share the view that health centres are not big enough to justify this form of investment. It may be that the schemes are set up not centre by centre but in clusters to be more attractive to investors.
Discussion on this issue featured at this year’s UKREiiF with attendees reflecting concerns about the speed of delivery, ownership structure and learning the lessons of LIFT.
Opportunities for investors
The government’s targets for new NHCs are ambitious but will not be realised without private investment. Encouragingly, investor appetite is strong, with both capital and contractor interest evident, including through the emergence of industry groups such as the Neighbourhood Health Forum. For investors, this represents a compelling opportunity: secure, long-term returns insulated from wider market volatility. However, delivery will hinge on addressing the practical barriers, including navigating the NHS landscape and, critically, establishing a commercially realistic PPP model backed by a credible pipeline of projects.
If you'd like advise on investing in healthcare premises, get in touch.
Our content explained
Every piece of content we create is correct on the date it’s published but please don’t rely on it as legal advice. If you’d like to speak to us about your own legal requirements, please contact one of our expert lawyers.