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The best of both worlds for property investors?

Property investors are increasingly attracted to healthcare, in large part because tenants with government-backed income are a safe bet and 25-year leases are the norm. But when it comes to green or brownfield healthcare development it is generally the private sector, not the public sector with the most projects. As demand rises the private sector across Europe is taking up some of the slack with either an increased PMI or out-of-pocket spend or through public-private joint ventures. The combination of these two gusty tailwinds could prove very lucrative for property investors.

This week HBI hosted its second property webinar, diving into the cure sector, on the back of our Special Report on healthcare property, published last month. The panel featured Sophie Cooper, Associate Director at commercial real estate advisor CBRE, Simon Betty, Head of Europe for Canadian-listed Northwest Healthcare REIT and Jonathan Webb, Director of Strategic Projects for UK-listed REIT, Assura.

As speakers discussed the topic of new-build vs renovation, one UK hospital project in Birmingham was mentioned as a potential new blueprint for development in the acute sector. 

The Harbourne Hospital in the UK’s second-largest city, Birmingham, is located on the campus of the NHS’ Queen Elizabeth Hospital and is a greenfield joint venture between private provider HCA Healthcare UK and University Hospitals Birmingham NHS Foundation Trust. Full to the brim with the latest technology, including a da Vinci surgical robot and a linear accelerator, the 72-bed facility features a plethora of outpatient services. Two of its eight floors, however, are reserved for NHS patients, and operated by the NHS Trust’s staff. 

It feels like a win-win – doctors get to continue to work in public and private capacity on the same site, NHS patients and local communities get access to the latest technology and facilities and the political hot potato of selling public assets to the private sector is diminished. The common estimate in the UK is that a new-build hospital will cost roughly £1m per bed and with the huge cost of materials, for property investors a mixed-revenue model of stable government-backed provision plus strong private pay growth makes a stronger investment case. 

From the outside, and with the hospital only opening its doors at the start of the year, onlookers wait with bated breath to see if this is a model for the future. 

This is reflective of a wider trend in the market, as existing infrastructure tires and more and more care is pushed into an ambulatory setting or a home-based setting, what happens to large hospitals? The future looks to be about clustering specialised services in the communities around large hospitals – a strategy that Robert Möller, CEO of Germany’s €12bn revenue Fresenius Helios will outline during his opening keynote at HBI 2024 in June.  To achieve this model of integrated and omni-channel healthcare delivery property investors will have lots of opportunities including an ability to impact struggling urban locations such as shopping centres and office buildings. 

HBI 2024, “New Models for the New Era”, June 10-12 in London features CEOs and investors from all corners of the sector sharing their success and growth stories. Hear directly about their strategies, new business models and market predictions through case studies and data-driven presentations. You can find out more and book your tickets here. 

We would welcome your thoughts on this story. Email your views to Lee Murray or call 0207 183 3779.