International real estate consultancy firm Cushman & Wakefield (C&W) recorded a transaction volume of around EUR 325 million in the German healthcare real estate market in Q2 2023 (Q2 2022: EUR 430 million). This brings the total transaction volume in this segment in H1 2023 to around EUR 650 million. The market for healthcare real estate continues to be very liquid, but institutional investors are examining the operative business in more detail.
Nursing homes contribute the plurality of transaction volume
The largest contribution to German health real estate transaction volume in Q2 came from the nursing home segment, accounting for some 47 percent. With a transaction volume of around EUR 90 million, ambulatory medical care facilities contributed around 28 percent and senior assisted living contributed some EUR 80 million, 25 percent.
Individual-property transactions, dominated market activity in the period from April to June, contributing for over 76 percent of transaction volume. The majority of the capital, over 80 percent, came from domestic investors.
Prime yield continues to rise
The prime yield for nursing homes in Germany rose to 4.8 per cent (Q2/2022: 4.0 per cent; Q1/2023: 4.4 percent). For senior assisted living, the figure was around 4.3 percent (Q2/2022: 3.0 to 3.5 percent; Q1/2023: 3.75 to 4.0 percent). The prime yield for ambulatory medical care centres rose to around 4.7 percent. The drastic increase over the past nine months is largely attributable to the changed financing environment.
Jan-Bastian Knod, Head of Residential Investment and Head of Healthcare Advisory at C&W, commented: “The market for healthcare real estate continues to be very liquid, especially compared to traditional real estate asset classes. Both domestic and international sources of capital are showing great interest in continuing to invest in healthcare real estate. However, due to the insolvencies of some care facility operators, operator properties are now being scrutinised much more closely than they were nine months ago. Positive operating figures and a good operator credit rating are indispensable for institutional investors.”
Increasing demand for care services meets tight supply
The number of people requiring long-term care in Germany continues to rise sharply. There were just under 5 million people requiring care in 2021, with this figure likely to some 5.4 to 6.1 million by 2030 and further, to 6.0 to 6.8 million by 2040. “The demand for ambulant and inpatient care services is continuously increasing and further supply is urgently needed," says Jan-Bastian Knod. "In the meantime, some operators are struggling with increased personnel and material costs due to the new collective bargaining law. The elimination of some care beds to meet state-specific density requirements as well as rising energy and construction costs pose further challenges for them and the owners.”
