International real estate consultancy Cushman & Wakefield (C&W) reported transaction volume of around EUR 1 billion in the German healthcare real estate market in H1 2022 (H1 2021: EUR 1.14 billion), making it the second strongest H1 in the past ten years. At around EUR 430 million, the 2nd quarter was slightly above the previous year’s equivalent figure. The majority of the transaction volume was again accounted for by nursing care properties, contributing some EUR 357 million.
Prime yields stable
As in the previous quarter, the prime yield for nursing homes was 3.9 percent. In the assisted living segment, C&W note values of between 3.0 and 3.5 percent. The prime yield for medical centres and medical care centres is between 3.5 and 4.0 percent, for clinics and hospitals it is about 50 basis points higher.
Jan-Bastian Knod, Head of Healthcare Advisory and Residential Advisory at C&W: "Demand for care properties remains high, both among investors already active in the German market and among potential entrants to the market. The financing environment has changed significantly over recent months. Nevertheless, prime yields remain static for the time being, reaffirming the crisis resilience of healthcare real estate already proven during the Covid-19 pandemic."
Individual transactions determine market events
Individual asset transactions accounted for about EUR 338 million, or about 78 per cent of total transaction volume. Regarding portfolio transactions, the purchase of the Futura III portfolio by Primonial made a very significant contribution to transaction volume. The seven properties comprising the portfolio are leased long-term by advita Pflegedienst GmbH. C&W expects further major portfolio transactions to be completed by the end of the year.
Forward transactions still very relevant in the care sector
Due to the lack of existing properties in the care sector, especially assisted living facilities, forward transactions, with over 30 per cent of the total transaction volume in Q2 2022, continue to make a significant contribution. The increasing demand for ambulant and inpatient care places can only be met by expanding capacity.
Increases in construction costs and rising interest rates make planning more difficult
"Higher construction costs, rising interest rates, geopolitical crises and growing inflation rates are causing great uncertainty. Nonetheless, we continue to see increased interest in healthcare properties. In this context, the quality of operators and key operating figures are increasingly carefully perused by investors. They are also continuing to seek greater diversification of their portfolios," says Jan-Bastian Knod, Head of Healthcare Advisory at C&W.
"The operator market in Europe has become increasingly professionalised and consolidated in recent years. As a result, there are already some larger operator platforms active across Europe. However, many investors prefer a mix of large, creditworthy operators and small to medium-sized regional companies with regional expertise in the specific markets for their properties."