Patrick Ryan, principal at SIRE Capital Partners, offers a comprehensive overview of Single Asset Funds (SAFs) within the UK healthcare real estate sector and the role they can play for investors focused on wealth preservation

The appeal of healthcare real estate

Healthcare real estate, particularly care homes, has become a highly-sought-after asset class due to its resilience and needs-driven demand.

The UK’s aging population and the increasing need for care facilities underpin the sector’s long-term growth prospects.

This demographic trend ensures a consistent demand for healthcare properties, making them attractive for investors seeking stable, inflation-linked income.

For investors focused on wealth preservation, the stability and long-term nature of this sector are particularly appealing, offering a secure avenue for their capital.

Demographic tailwinds

The UK’s aging population is driving a significant increase in demand for care homes and other healthcare facilities.

According to the Office for National Statistics, the number of people aged 85 and over is projected to double by 2045, further solidifying the long-term demand for healthcare real estate.

This demographic shift provides a strong foundation for long-term investment, ensuring a consistent need for care facilities.

Needs-based demand

Healthcare services are essential, making the demand for healthcare real estate less susceptible to economic fluctuations.

This resilience is a key attraction for investors seeking secure income streams, as healthcare needs remain constant regardless of economic cycles.

This stability is particularly appealing for those in the wealth preservation phase, who prioritise secure and consistent returns, offering a reliable investment option.

Long-term leases

Healthcare properties will often have long-term leases with established operators, providing investors with predictable and stable rental income.

These leases are usually indexed to inflation, offering protection against rising costs and ensuring a consistent return on investment.

For example, a 20-year lease with annual rent increases linked to the Retail Price Index (RPI) can provide a predictable and inflation-protected income stream.

This stability is particularly appealing in uncertain economic times, providing a secure income stream for investors focused on wealth preservation.

The supply and demand imbalance

The UK healthcare real estate sector faces a supply-demand imbalance, with rising care home demand outpacing new development.

Complex planning processes further restrict supply, driving high occupancy and stable income for existing facilities.

And this creates a strong opportunity for investors seeking secure, long-term returns in an essential and resilient sector.

Challenges and considerations

While the healthcare real estate sector offers significant opportunities, it is essential to be aware of the challenges and considerations that investors may face.

These include regulatory hurdles, rising operational costs, and staffing shortages.

Understanding these challenges is crucial for making informed investment decisions.

For those in the wealth preservation stage, a thorough understanding of these challenges is essential for mitigating risks and ensuring the long-term viability of their investments.

Investors should conduct thorough due diligence to assess these risks.

Rising operational costs

Care providers are facing rising costs due to factors such as inflation, increased minimum wage requirements, and National Insurance hikes.

These can impact the profitability of care home operations and, consequently, the returns for investors.

For instance, the increase in the national living wage has put pressure on care home operators, who must balance increased costs with maintaining quality care.

Staffing shortages

The healthcare sector is experiencing staffing shortages, which can impact the quality of care and the operational efficiency of care homes.

According to a report by Skills for Care, the adult social care sector in England had a vacancy rate of 9.9% in 2023.

Investors need to consider the impact of staffing challenges on the long-term viability of their investments, as staffing levels directly affect the quality of care and the reputation of the care home.

This is a critical factor for ensuring the long-term success of the investment, requiring careful consideration of the operator’s staffing strategies.

In conclusion

Single Asset Funds in UK healthcare real estate present a compelling investment opportunity for those seeking secure, long-term income streams.

The sector’s resilience, driven by demographic trends and needs-based demand, makes it an attractive option for investors in 2025.

However, it is essential to be aware of the challenges and considerations, such as regulatory hurdles and rising operational costs.

Partnering with an FCA-regulated fund manager, such as SIRE Capital Partners, can provide investors with the expertise and transparency needed to navigate this complex market.

As the UK’s population continues to age, the demand for healthcare real estate will only increase, making it a sector with significant long-term growth potential.

For investors looking to build the future they deserve, SAFs in UK healthcare real estate offer a promising avenue for stable, long-term returns.

Article previously published by Christie & Co.