February 16, 2021
Article
Rachel Seward MRICS, Director of Christie & Co says that, regardless of the challenges presented by the pandemic, there has been a promising start to the care home market in 2021.
Despite all the challenges of 2020, the care sector has demonstrated admirable strength and resilience. Operationally, the sector has had to trade through an unprecedented situation caused by Covid-19, with care home operators and their staff doing an exceptional job in the circumstances.
Average care home occupancy in the UK was reported to have dropped to circa 80% during the first wave, followed by a slow increase during the summer months. The increase in cases in December had a further detrimental effect on occupancy levels, but operators have been quick to adapt and many have benefitted from support from the local authorities. Staffing has become very difficult, with increasing numbers of positive cases being detected through the testing programme.
The 2020 care home market was characterised by a lack of new stock coming to the market in the region, understandably. However, the transactional market remains surprisingly buoyant; Christie & Co sold over 145 care home businesses last year, and agreed deals on over 200 individual care homes. The robust demand and limited supply of businesses resulted in only a very limited decline in price movements for care homes of 1.50%, following an increase of over 5% in 2019, according to our annual Business Outlook report.
The funding market remains challenging and as a result over 50% of the deals we concluded in 2020 were on a cash basis, with operators then seeking to refinance in the medium term. Encouragingly, those care homes coming to the market with no negative trading impact are generally seeing offers at pre-pandemic levels. Local deals concluded recently include the sale of Mavern Care Home in Melksham on a sale and leaseback basis with Impact REIT funding the purchaser, The Larches in Tiverton, and Whitelodge in Bristol.
Even though the country remains in lockdown, buyer demand shows no sign of waning; 2021 has started very positively with over 23 new deals agreed in January, which is ahead of the same period last year by over 25%. It seems that investor demand remains undiminished, despite one of the most difficult periods the sector has ever faced.
You can read our full business outlook for the healthcare sector, including the results to our Sentiment Survey, on our website.
For advice from Christie & Co, contact Rachel Seward MRICS on 117 946 8511 or by email rachel.seward@christie.com
Read the latest edition of our care newsletter here.