The UK’s elderly care sector lags behind other major European countries when it comes to the quality of its real estate. Most of its care homes are old converted houses; purpose-built facilities built this millennium account for only around a quarter of care homes.
“Some of the old ones we’ve seen have been dreadful,” John Flannelly, head of investment at Target Fund Managers (TFM), a real estate investor focused exclusively on the UK elderly care sector, tells us. “I was in a converted old home in England a couple of years ago. It was a house that had been extended into the back garden. It was a bit of a labyrinth, with very narrow corridors (you had to walk all the way back to reception to let people pass you). This is an extreme example. But a lot of purpose built care homes built in the early ‘90s have very narrow corridors, they’ve crammed a lot into a small space. These are not spaces I would want my parents to live in.”
Alberto Fernandez, CEO of Healthcare Activos, a Spanish REIT, has been working with Moody’s, a credit-rating agency, to devise Social KPIs for health care real estate investors to focus on. One of the core KPIs they’ve come up with centres on having care homes that are the right size, and that are segmented into specialised ‘sectors’.
Fernandez explained: “A minimum size is required for the operator to get critical mass (financially, operationally and for medical purposes). In the UK 75% of private homes have less than 50 beds, which is very suboptimal. In Spain it’s 50%, in Germany it’s 31%, in France it’s 7%. Ideal buildings should have 90-120 beds, and they should be ‘sectorised’, i.e. divided into smaller ‘homes’ or sectors of 15-25 beds, to specialise the residents and the workers, because there are significant differences in caring for physically dependant residents vs. palliative care vs. dementia or Alzheimer’s.”
Another big issue is that most care home bedrooms don’t have ensuite wet rooms. Flannelly: “In the UK only 31% of care home bedrooms have a wet room ensuite, whilst in prisons all have wet rooms en suite. This has changed over time – it was only 12-13% when we started, so there’s been some progress.”
But there is still a long way to go. And this means there is a significant opportunity for real estate investors and care home operators to provide more high-quality facilities.
“Doing new builds allows you to get involved in designing the layout,” Flannelly tells us. “You can optimise for efficiency, and can make sure all the bedrooms have wet rooms. We’re also passionate about our homes having balconies and roof terraces – it’s much better if everyone has space on their own level where they can get fresh air.”
We are putting the finishing touches on a deep delve into European health care real estate and will be publishing the full report shortly in HBI Intelligence.We would welcome your thoughts on this story. Email your views to Martin De Benito Gellner or call 0207 183 3779.