Half year review of the Care market

Specialist business property adviser Christie & Co provides an overview of the UK Care market in the first half of 2018, reflecting on previous expectations, emerging trends, and challenges facing the sector. 

The Social Care market remains very buoyant in 2018, with significant activity across all facets of the sector from supported living to elderly care. In particular, there has been significant investor appetite for quality, well traded healthcare assets let to mainstream tenants, such as Care UK.

As a result of increasing numbers of CVAs on the high street, investors are turning their attention to alternative markets, like healthcare, where the operational real estate plays a more significant role in the delivery of a business and is less likely to be undercut by the success of online companies. The first half of this year has continued to show aggressive buying of businesses across all subsectors of care at unprecedented yields. 

At Christie & Co, the team’s activity selling going concern care homes has increased year on year, with a continued churn of homes by the major corporate operators and regional players swelling the number of homes transacted. The team has yet to see a significant opco-only sale involving a social or healthcare business although many discussions have been ongoing. Positively, the healthcare development market remains very active with the team advising on a record number of development opportunities, albeit these are focused primarily on the private pay segment. In terms of consultancy and valuation activity, our team has had a very busy first six months with a wide range of mandates for a client base which includes a number of new but well funded entrants to the sector.

Predictions
As part of Christie & Co’s Business Outlook 2018, published at the beginning of this year, the team shared their market predictions for the year in the sector. Now reflecting on those forecasts at the half year period, some of the predications are continuing as expected.

As has been repeatedly noted by sector experts, along with Christie & Co, it is a challenge to secure the necessary number of nurses and care staff to meet demand. The recent immigration rule changes in relation to overseas doctors and nurses is a step in the right direction although staffing remains a key challenge for the NHS and adult social care.

The challenges presented by funding look to remain largely unchanged in the year ahead, with operators under pressure to grow fees and manage wage levels against the backdrop of limited local authority funding increases.

The recent high profile ruling in the Mencap appeal for sleep in pay now confirms that under law, wages for employees are only payable for the hours worked on a sleep in shift, and not those hours asleep. Whilst this slightly eases the financial burden on some operators, the greater issue of finding a sustainable long term funding model for care is still to be resolved.

Key transactions
Christie & Co provided brokerage or advisory services on c100,000 beds in the last 12 months to June 2018, which underlines our considerable market penetration in the sector. One of the most significant regional transactions to conclude through the team in the first six months of 2018 was the sale of 13 homes by New Century Care to Chesterfield-based Hillcare. 

At a corporate level, the acquisition of 110 homes from BUPA by HC One has been transformational in the shaping of the corporate marketplace.

Christie & Co will be launching its 2018 research and review of the adult social care sector on 11th September.