Healthcare/ Life Sciences: Resilience during turbulence

December 15, 2020

The last few months of any year are always a busy time in terms of market activity. In light of the economic impact of COVID-19, the final quarter of 2020 will be even more important as the market looks to recover from this turbulent year. With total transactions for UK real estate expected to be down 30% year on year in 2020, there has been a spotlight on the sectors that have remained resilient, and those who have shown up as opportunities to investors.

The healthcare/ later living and life sciences sectors are two areas of the market that have attracted attention throughout the pandemic. We have seen key transactions taking place, and with the discussion of healthcare needs coming to the forefront, as well as pharmaceutical companies responding to the global pandemic, there has been an increase in investor demand for both of these areas – particularly in London.

In terms of healthcare, later living has definitely been a talking point as it’s become even more clear this year that London’s ageing demographic is not being prioritised and care homes have been looked at more closely as it’s been evident that many of them are not fit for purpose.  Our latest report, “UK Care Homes: An opportunity to build communities and invest capital” highlights the need for a shake-up in the sector and the urgent need for more modern care homes to accommodate a growing number of residents who require long-term care.

The report shows that London is the most under supplied region in UK with just 22,639 beds across 525 nursing and care homes. This, alongside the fact that the UK’s biggest growing demographic is those over 75, will mean that the GLA and local councils will need to review the latent risks of their residents staying in their homes for longer. 

More broadly, we have seen a partnership between McCarthy & Stone and Anchor Hanover to deliver nearly 500 later living affordable homes across 5 sites, and we should expect more of this type of deal as the need to develop more purpose-built later living and care home accommodation continues to increase to meet a growing demand.

Life Sciences is another sector that investors have been paying particular interest to over the course of the year. In fact, we carried out a Capital Markets Investor Survey for H1 that found that UK investors thought the sector would provide the strongest real estate opportunities over the next five years, underpinned by resilient market fundamentals such as public sector investment, venture capital funding and academic research power.

For London in particular we have seen some sizable transactions coming through which have resulted in emerging clusters forming in Kings Cross, White City, Whitechapel, Waterloo and London Bridge. For example, Merck has recently confirmed that its planning to build a £1bn Drug Discovery Centre as a new HQ hub opposite King’s Cross and St Pancras Station. This commitment to London has only accelerated occupational demand from SMEs, scale up businesses and larger corporates.

Going forward, we certainly expect to see further growth in the life sciences sector, driven primarily by venture capital and public funding of life sciences, and we should expect to continue to see those London clusters forming, however for both life sciences and healthcare alike, take-up of space is limited by the lack of available space in London.

By Simon Hodson, Head of UK Healthcare and Christopher Walters, Director of Life Sciences, JLL