International real estate consultancy firm Cushman & Wakefield (C&W) recorded transaction volume of around EUR 185 million in the German healthcare real estate market in Q3 2023 (Q3/2022: EUR 640 million). This brings the total transaction volume in the healthcare real estate sector for the first nine months of 2023 to around EUR 835m (Q1-Q3/2022 EUR 1.66bn).
Nursing homes account for the majority of the transaction volume
With a total of EUR 185 millionQ3 2023 saw the lowest transaction volume of any quarter in the past three years. At around EUR 120 million, the nursing homes segment contributed the bulk of this figure, while around EUR 54 million was contributed by transactions in the assisted living sector. The remainder was attributable to the ambulant medical care segment. Individual-property transactions dominated, in a range of 5 to 20 million euros, and accounted for about 83 percent of the total.
Prime yield continues to rise
The prime yield for nursing homes in Germany rose to 5.1 percent (Q2/2023: 4.80 percent). For senior residences, for assisted living, the figure was around 4.5 percent (Q2/2023: 4.30 percent). The prime yield for ambulant medical care facilities (MVZs) is between 4.50 and 4.75 percent, and for inpatient medical care facilities (clinics) between 5.50 and 6.00 percent.
Jan-Bastian Knod, Head of Healthcare Advisory at C&W, comments: "Purchase prices for healthcare properties have been further revised downwards due to the deterioration in the financing environment and the currently elevated level of operator risk. The healthcare real estate market remains liquid, but yield requirements have increased across all risk classes. Domestic and international sources of capital continue to seek both new and existing properties, with some large discounts on existing stock for the implementation of necessary ESG measures. Some investors are also waiting for the capital market to stabilise and are only prepared to make acquisitions in the medium term."
Rising operating costs and high construction costs put pressure on operative business
Increased personnel and material costs as well as the lack of nursing staff are leading to higher operating costs overall and put pressure on the margins of nursing care operators. The discontinuation of the financing of pandemic-related additional expenses and reduced income from the care rescue fund have made a significant impact. In addition, future ESG refurbishment measures which are required will be priced in by investors, but fully compensatory rent levels are not expected. In addition, federal state-specific regulations for nursing homes are leading to increasing pressure on operational profitability.
