Total healthcare and elderly care spending now represents 9% of the world’s $70 trillion GDP, yet the healthcare real estate session at MIPIM, the international property exhibition, attracted just 90 out of MIPIM’s 20,000 delegates. But Stephane Pichon, who organised the session and calculated that 9% statistic from OECD data, said he wasn’t at all disappointed: “Ninety is a good number. The session on Africa got just 25!” We report on what the session tells us about healthcare property markets as diverse as China, the USA and France.
Pichon claims that the general atmosphere at MIPIM was positive. “People think that real-estate and infrastructure will attract institutional investors as bond yields on sovereign debt drop. Banks are lending again, so that always helps.”
The session looked at a developing market (China), a developed market (France) and a mature market (USA).
The contrast between China and the USA is extraordinary. Brian Cole, of Hampton Hoerter China, reckons that of the ten million elderly who need residential care, just 4,250 – or 0.04% – are in private beds. He believes, however, that this will change. Today, there are 12,500 private elderly care beds. While there are only 25 new projects currently under construction, there are 450 in the pipeline. Cole forecasts that, in 2017, the private sector could have 7% of the country’s beds.
French nursing home operators are taking a keen interest. The fifth-largest domestic player – Colisée Patrimoine Group, with 3,300 beds in France and Spain – has been in China for the last nine years. Orpea, the largest French group, is also rumoured to be interested in China, Brazil and India.
Cole admitted that there are risks. The Chinese government wants to slow down the housing market and may limit new starts. He also thinks that China will need to import staff from Taiwan and the Philippines. “There just aren’t any trained staff,” he admits. Staff shortages remain a big problem in other former communist countries, including in Europe: the Czech Republic and Russia have notorious staffing problems.
In France, Guillaume Truong at Gecina – which is heavily involved in healthcare property – said that the Hollande government did not want to launch any new partnerships with the private sector. Nonetheless, there is plenty of growth potential: private nursing homes are looking to sell property to fund foreign ventures, while squeezed hospitals are turning to investors to stay in the black.
He pointed to other growth areas, such as the not-for-profit sector, much of which faces a squeeze as government spending is cut. He says that smaller not-for-profit operators have been hit particularly hard and are now targets for acquisition. Pichon says that the two major players in the not-for-profit care sector – which is larger than the for-profit sector – are the Caisse D’Epargne Foundation, with over 100 homes, and the Mutualite Francaise, the largest French mutual, which has a network of 100-150 care homes.
Gecina has been busy in France. It recently signed a deal to buy a €70m property from Capio in Bayonne, which will fund the construction of a hospital intended to consolidate four separate sites.
The USA, meanwhile, is the polar opposite of China. Mel Ganzon, president of Senior Housing Global Advisor, estimates that $275bn of healthcare property assets have already been sold on to external investors. The big US healthcare REITs are now valued at over $30bn each, and according to Pichon have weathered the recession better than any other type of REIT. Ganzon says that these players are now looking seriously at Europe, following Healthcare REIT’s acquisition of the Sunrise assets in the UK. According to Ganzon, there has been a sea change in the last six months, and, while there are still opportunities in the USA, the big healthcare REITs are now eager to expand internationally.
Within the USA, he points to the growth of assisted living, which is much larger in America than in Europe. He expects demand to rise from 18,000 new units per year today to as much as 82,000 a year from 2025 to 2030. He says that the USA has also seen the rise of mixed occupancy developments, where nursing homes and assisted living units are placed next to retail and residential. He also says that intergenerational facilities are in vogue where students and other young people get free or subsidised accommodation in exchange for helping the rich elderly.
Our Analysis: We’d expect the size of the potential markets in the BRICs will attract big European providers. The USA is fascinating, but, despite some success in France, there is much less physical space for big assisted living developments in Europe.
Source: Healthcare Europe / March 28th 2013