The internationally-active property consultancy Cushman & Wakefield has produced a new analysis of the German nursing care property market.
In the report, authors Simon Jeschioro, Head of Investment Advisory and Jan-Bastian Knod, Associate Investment Advisory, examine the regulatory framework, socio-demographic factors, and the latest developments in the market for care homes and assisted living properties. Their conclusion is that nursing home and assisted living property remains a high-potential asset class going forward.
As the demographic shift gathers pace and the number of people with care needs rises rapidly, there is an increased focus on living concepts for advanced age. “Currently, one in four German citizens is aged 60 or above, and in 2017, there were already 3.42 million people in need of care,” states Knod. “By 2050, this number is expected to have risen to 5.36 million,” he continues, explaining that, in view of this increase, the 14,500 residential care homes offering 950,000 places will not be sufficient.
Home care is a win-win situation for providers, investors, and people with care needs
In 2018, 52% of those in need of care were being looked after by their relatives, with 24% in residential are and a further 24% receiving care in their own home.
“Assisted living combined with home care or visits to day-care centres for the elderly is an attractive solution not just for people in need of care, but also for those operating facilities and for investors in the sector,” says Jeschioro, explaining that the reason for this is that assisted living and sheltered accommodation are not governed by the same strict regulatory requirements as residential care homes.
Between 2013 and 2017, there was a rise of 35% in the number of people receiving care in their own home; according to Cushman & Wakefield experts, the political will to expand ambulatory care provision means that demand for home-visit care services is set to grow in tandem with part-residential and age-adapted living concepts.
A fragmented market offers good prospects
In terms of care home providers, the German market is strongly fragmented – with a growing tendency towards consolidation.
“Measured in the number of places in residential care homes,” explains Knod in his analysis, “private operators have a 40% market share. There has been a wave of take-overs by financial investors and private operators from abroad, leading to consolidation.”
The authors conclude that “regional, medium-sized operators represent attractive targets for investment. There is still room in the German market for the creation of a profitable platform or chain of commercially-run homes.”
The care home and assisted living property investment market
Between 2013 and 2019, investment in care homes and assisted living complexes across Germany totalled 11 billion Euros, with 1.7 billion spent in 2019; top yields ran at 4.3%.
“In order to secure urgently-needed investment in new forms of assisted living and sheltered accommodation, regulatory barriers such as strict standards for the quota of single-occupancy rooms will need to be reduced. Long-term oriented investors need planning security, not a restrictive planned economy,” warns Jeschioro.
Expert interview
The authors of the report also interviewed Dr. Matthias Faensen, partner and advisory board member at advita Pflegedienst GmbH, one of Germany’s leading providers of ambulatory care services and an operator of assisted living properties. Faensen offers first-hand insights into the reality of care service provision and his own views on the outlook for the sector.
