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UK healthcare property market sees record €3.14bn investment in 2020

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The UK healthcare property market saw record investment volumes in 2020 totalling €3.14bn (£2.7bn) despite the COVID-19 pandemic, 55% higher than last year, as investors increasingly seek stable returns and long-term secure income, according to global property adviser Knight Frank. This comes as healthcare property has seen surging interest from investors both in the traditional sectors such as care homes and private hospitals, in addition to rising demand for more specialist assets and providers such as mental health, learning disability and children’s services including children’s homes, foster care and schools.

 

An increasingly broad church of investors is targeting UK healthcare including a rising weight of institutional capital, a strengthening selection of REITs, and a growing level of overseas investors. Overseas capital has significantly increased, accounting for 72% of healthcare transaction volumes in 2020, markedly above the 41% share seen across the last five years.

 

The most significant deals were focused on the private hospital market, with North American REITs expanding their presence in the UK. European entrants have also been involved in some hugely significant deals already in 2021, with French operator Korian making its entry into the UK elderly sector and Belgian REIT, Cofinimmo, also acquiring assets in the Irish market. Both transactions are pivotal in restoring confidence and signal overseas capital is likely to play a critical role in the sector in 2021 and beyond.

 

Despite healthy investment flows, the pandemic has posed an unprecedented operational challenge for the sector, with hospitals, care homes, GP practices and other specialist healthcare facilities adopting stringent infection control measures, often at a cost, and private sector workforces being stretched in many of the same ways as the NHS. The greatest concerns were understandably focused on the elderly care home which impacted investment volumes with the elderly care sector representing 18% of all healthcare property investment, compared to 39% across the last five years.

 

Julian Evans, Head of Healthcare at Knight Frank, said: “Investment appetite for healthcare real estate remains strong, both in more traditional assets such as care home developments as well as more specialist assets including the increasingly popular mental health services sector. This demand is only strengthened by the limited supply within the healthcare market combined with the awareness of the ever-growing demographic fundamentals for these assets which are driving the sector and make it largely recession-proof amidst testing economic conditions in 2021. The year ahead will not be without its operational challenges as the sector looks past the COVID-19 pandemic. Despite this, we expect to see increased global and domestic capital directed at healthcare real estate as investors seek the safety provided by long-dated income the sector provides and look to de-risk and re-weight asset allocations out of retail and into alternative sectors; and the pandemic will likely accelerate investment into social infrastructure. We expect to see more investors target new development opportunities through both direct investment and lending. This inward investment is vital for the future of the sector.”

 

The strong fundamentals driving the need for healthcare real estate meant that the healthcare property sector outperformed the rest of the commercial real estate sector, with returns in the sector holding strong at 6.3% in 2020, whilst the wider sector saw returns below the long-term average. With a growing pool of investors and a diverse range of different asset types, healthcare transaction volumes have increased year-on-year since 2016, in contrast, to deal volumes in the wider commercial real estate market, which have stagnated and fallen in recent years.

 

High-profile healthcare property deals that are on the market and in the pipeline include mental health services provider Elysium Healthcare (c. €1bn /£900m), children’s care and education services provider Keys Group (€290.3m/£250m) in addition to another €3.5bn (£3bn) of specialist (mental health, learning disability) providers and €1.16bn (£1bn) of broader healthcare property transactions. England’s largest mental healthcare provider The Priory Group was sold to private equity group, Waterland, for €1.28bn (£1.1bn) at the start of 2021.

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IHG to open new hotel in Brussels (BE)

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IHG Hotels & Resorts (IHG) announced the signing of voco Brussels City North, marking entry into a new market. Due to open in autumn 2023, the 92-key voco Brussels City North property will be operated by Prem Group, a strong partner for IHG in the region. The state-of-the-art hotel will feature a restaurant and conference centre and will adjoin the Innovation Centre, which is already open on the site, to create a hub for hospitality innovation and a truly stimulating environment.

 

Located to the north of the city, the hotel will feature a striking 50-metre tower with huge glass windows providing panoramic views of the Brussels skyline. The site itself will be Europe’s largest experimental lab for creating ideas and a vision for the future. In line with voco hotels ethos, voco Brussels City North will stand out from the crowd and give guests a different choice.

 

Willemijn Geels, VP Development Europe, IHG Hotels & Resorts, said: “I’m delighted to announce that we are partnering with Living Tomorrow to bring voco hotels to Belgium. We know that Brussels is a strong market for branded properties, and we are confident that the voco hotels’ brand will fit well with the goal of creating a truly innovative hub on this unique site.”

 

Yin Oei, CEO, Living Tomorrow, said: “Living Tomorrow is focused on driving the future and we’re excited to partner with IHG to develop this exciting hotel – the first voco in Belgium. The values of voco hotels fit well with our desire to innovate and push boundaries and we know that the strength of the IHG systems will provide a stable platform from which to innovate.”

 

 

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Mitheridge and London Green unveil plans for Lambeth mix-use scheme (GB)

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Mitheridge Capital Management and London Green have unveiled plans for a residential-led, mixed-use development in Lambeth, south London. The project will make use of a former industrial site in Loughborough Junction, Lambeth, while also protecting the adjacent intersecting Victorian railway viaducts which remain a rich heritage asset.

 

Managing Partner of Mitheridge William Yerburgh said: “London desperately needs more homes. We believe strongly in an approach to housing provision that is affordable but also enhances the character and vibrancy of local communities. Our partnership with London Green will show that new housing provision can deliver for everyone.”

 

Daniel Rastegar, Investment Director at Mitheridge commented: “We are excited to work with London Green to deliver a scheme that will contribute positively to this area of Lambeth, both by providing highly sustainable, high-quality homes as well as new industrial space for SMEs.”

 

Harry Green, Director at London Green added: “This represents yet another opportunity to develop an underutilised site into a mixed community of sustainable homes and workplaces. We look forward to working with best-in-class consultants and contractors to deliver the vision that we share with Mitheridge Capital Management”.

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IIProp grows its presence in Spain

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IIProp (International Industrial Properties) has successfully delivered the initial phase of its built-to-suit project in the Spanish city of Murcia. The joint venture has also launched a new development project at a prime location in Nadarzyn, Warsaw South, Poland. The scheme is located in Murcia’s San Andres industrial park and offers 22,346m². The project is set to add another building of over 23,000m², bringing the total development area to 46,600m² GLA. Construction of a 23,000m² follow-on component is under way and scheduled for completion in January 2023. The project marks an important milestone for the IIProp’s expansion in Spain, where the platform has secured pipeline for development of some 63,000m² GLA in the Murcia and Barcelona regions. The development comes with excellent connectivity and visibility as it sits alongside the A7 highway, part of the Mediterranean transit corridor that links Spanish and Portuguese ports with mainland Europe. The project is set to obtain “Very Good” BREEAM certificate, which will be supported by green solutions such as solar panels, charging stations for electric cars, power sockets for electric bicycles and scooters as well as bicycle parking space and a bee shelter.

 

Nebil Senman, Managing Partner at Griffin Capital Partners, said: “The logistics market in Europe experienced an unprecedented growth during the pandemic and despite the geopolitical turmoil the tenant demand remains strong. We selectively are developing projects in Murcia and Warsaw with highest ESG standards and securing highest tenant covenants to fulfill core investor’s requirements. We plan to continue to build up carefully our European logistics footprint by selectively adding projects in core European markets as well as through converting our well-positioned land bank into standing assets.”

 

Maciej Dyjas, Managing Partner at Griffin Capital Partners, commented: “The projects in Murcia and Warsaw are another success stories in our strategic partnership with Panattoni. We continue to screen new European markets for entry and already begun working on potential development projects in countries like France, Italy, and Austria. In parallel, the IIProp’s pipeline stands at ca. 430,000m² GLA, despite latest disposals completed in Germany.

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