Simon Harvey and Rachel Seward MRICS, Directors of Christie & Co, see lots of positives for care homes in the South West.
Thankfully the summer influx of tourists to the South West did not lead to a large spike in case numbers. With winter beginning the much anticipated second wave is now in full flow, and many homes in the South West have reacted early and closed their doors to all bar essential visitors. Whilst speculation is rife as to how severe the second wave will be there appears to be heightened optimism amongst many operators, who feel more prepared with stringent admission protocols in place, good levels of PPE stocks and regular testing occurring.
Pre-Covid our analysis shows that average occupancy in the South West was around 90%, slightly higher than the UK average. Whilst we have no substantiated evidence, anecdotal evidence is positive with a high percentage of homes appearing to have had nominal or no impact on occupancy, with no positive staff or resident cases. In July 2020, CQC published statistics showing that the South West had the lowest level of infections, with just 29% of care homes reporting an outbreak compared to other English regions at between 36% and 54%, with an average of 45.5%.
Over recent years the UK care home market has attracted new investors, who are increasingly seeking alternative asset classes and a more secure, long-term sector. Since the onset of the pandemic this trend has increased, with traditional commercial sectors such as office and retail suffering. Buyer appetite in the sector remains very strong and Christie & Co are pleased to have carried out 408 care home viewings with 277 offers, 105 agreed sales and 73 exchanges since the start of lockdown. We are also seeing more buyers potentially considering the South West due to the lower infection numbers and strong trading performance of many homes, with values appearing to be largely maintained across the sector if trading has been unaffected.
Notwithstanding this, lending in the sector continues to be challenging, particularly for first time buyers with no experience. Criteria previously considered desirable in the market, such as experienced operators, CQC ratings of Good or Outstanding and established strong trading performance, are now largely essential; and even experienced purchasers are unlikely to see LTV ratios above 55% to 65%. The impact of tightened lending criteria on values remains to be seen but for the moment, overall the sector is showing resilience and plenty of activity, is this a positive for care homes?