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News archive - January 2017

Booming market provides new opportunities

Booming market provides new opportunities

While many construction markets are suffering from a lack of investment, the care home sector remains a compelling proposition for investors, with profitability increasing during 2016.

According to the latest research published in Knight Frank’s Care Homes Trading Performance Review, the sector continues to be resilient following the EU Referendum, with profitability increasing from 27.1% in 2014/15 to 27.5% in the 2015/16 financial year.

And Knight Frank predicts that, despite current economic uncertainty, the sector is likely to drive increased investor appetite over the next 12 months.

Its head of healthcare, Julian Evans, said: “In the face of emerging challenges such as the EU Referendum outcome, and the increase in the National Living Wage, the care home sector remains a highly-attractive investment for UK and overseas investors.

“The fall in sterling, combined with the fundamental strength of the occupational market makes the care home sector appealing to those investors wishing to diversify their asset portfolios.”

This increase in interest is echoed in Barbour ABI’s document, The Outlook for the UK Residential Care Construction Market 2016, which was produced for last year’s Care & Dementia Show.

Increased value

It revealed that the total value of residential care contracts reached over £2billion last year.

The South West of England led the way, with 26% of the market share, followed by the West Midlands, which accounted for 15% of contract values.

The top care home project in 2016, based on construction contract value, was the Kidbrook Village Care Apartments scheme in London, led by Berkeley Homes.

An example of this widening investor interest can be seen in the launch of new care home operator, Oakdale Care Group.

A newcomer to the market, the company is developing a chain of residential facilities for the elderly after securing a £13m funding package from Clydesdale Bank.

The Buckinghamshire-based firm, which was founded by a small group of individual investor/directors with significant experience in the sector, aims to become a leading provider of elderly care facilities, with plans to deliver three new 66-bed residential care homes in the Northern home counties region.

Clydesdale Bank is supporting the development of two of the homes and is providing funding for the third upon completion.

The homes, which are being built by LNT Care Developments, will provide a mixture of residential and dementia care.

Construction is due to start soon, with completion scheduled for autumn this year.

Johnny Rowe, senior director at Clydesdale Bank, said: “Healthcare is a key sector for Clydesdale Bank and our focus is on ensuring the availability of development finance and growth funding for operators.”

And care home company, The Retirement Villages Group (RVG), has recently announced the largest development programme in its 35-year history, with a pipeline of projects in seven new locations which will be delivered over the next five years.

The provider already operates 14 retirement villages, mainly focused in the South of England.

In the pipeline

The development pipeline is made up of 500 new residential units and 160 care beds across seven prime locations in the South East. Other sites are located at South Chailey, East Sussex; Merstham, Surrey; Lower Shiplake, Oxfordshire; and West Malling, Kent.

Planning consent has already been secured on two of the sites, while the others are being advanced through the planning process.

The gross development value (GDV) of the new pipeline is in excess of £200m.

RVG is also embarking on a programme of expansion across its existing village portfolio with opportunities at eight of the 14 sites.

William Crawford, group development director at RVG, said: “Senior living in the UK is a nascent sector and, in our view, offers the greatest growth potential in UK real estate.

“We are looking forward to capitalising changing market dynamics and embarking on the next chapter of the company’s growth.”

According to the Office for National Statistics, more than 11.6 million people are aged over 65, with 1.5 million people aged over 85. By 2039, it is estimated that the number of over-85s will more than double, reaching 3.6 million.

Many of these will no longer be able to live in their own homes, so supported housing is an increasing necessity.

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