UK to reap rewards from healthcare investment

The UK will benefit from a predicted $200bn (£157bn) investment in healthcare infrastructure over the next five years despite Brexit uncertainty, according to a new report. The UK was found to be the most attractive region for future inwards investment into healthcare properties, according to Octopus Group, which surveyed institutional investors with $6.8tn assets under management. The majority (58%) of investors think Brexit will have a negative impact on healthcare infrastructure in the UK over the next 12 months. However, more than 70% of those that are yet to invest in the sector are still considering allocating funds to the UK, while 60% of global institutional investors continue to prioritise existing investments in the UK. Europe is the primary focus for inward investment into healthcare infrastructure. Nearly half (45%) of those prioritised investment in Germany, while 39% focused on France. Both a shortage in later-living properties and growth in the ageing population globally will drive the $200bn demand. The average portfolio allocation of 6.1% in healthcare infrastructure among existing investors is expected to rise to 9.5% by 2023. Among all institutions surveyed, 57% are considering investing in retirement housing, 53% are potentially looking to invest in care homes and nearly half (44%) in GP surgeries. Benjamin Davis, chief executive of Octopus Healthcare, said: “Not only is the ageing population growing, but the make-up of this group is changing beyond recognition. “Improved quality of life in later years is transforming the way the over-60s live. “This group is more active than ever before and has higher expectations than previous generations. “Globally there is a significant lack of accommodation to cater to this varied group’s needs. This demographic shift is creating a strong investment opportunity for institutional investors.” Investment drivers Nearly half of investors (46%) cited attractive risk-adjusted returns as a driver to invest in the sector, with almost one-fifth of respondents (19%) experiencing over-performance. Meanwhile, 39% of existing healthcare investors recorded 10-15% returns over the past five years. Two-thirds of respondents were attracted to the sector as an opportunity to diversify their portfolio and pursue an investment that has low correlation with broader financial markets. Hiti Singh, head of institutional funds at Octopus, said: “The expected end of the market bull run, coupled with heightened political risk across the globe, is driving institutions to alternatives in a hunt for returns. “Alternatives and within this, real assets, meet institutional investors’ requirements for long-term, tangible investments.” Asian investors were found to be the most active within the sector, with an average current allocation of 10.6% of their portfolio. This is expected to climb to 12.1% over the next five years. Nearly three quarters of UK investors (73%) say they will increase their allocations, with 26% planning to up these by more than 10%. Meanwhile, 71% of existing healthcare investors said their assets are either performing as expected (52%) or over-performing (19%). To send feedback, e-mail pui-guan.man@egi.co.uk or tweet @PuiGuanM or @estatesgazette