Yesterday saw the second Healthcare Property Forum take place in Newport. Here we look at some of the take-home points from the event

The significant shortfall in care home beds across the country underpinned discussions at the second Healthcare Property Forum, held yesterday in Newport, Wales.

The one-day event brought investors, heads of estates, operators, developers, and product and service suppliers together for a day of networking and analysis.

Held at Celtic Manor in Newport, and co located with the Caring Times Owners’ Club, the forum included an agenda of expert-led sessions covering key topics impacting health and care estates.

With a particular focus on the social and elderly care sector, the four speaker sessions – chaired by Healthcare Property editor, Jo Makosinski, featured sector-leading commentators, including Hannah Haines from Christie & Co.

She shared the results of its research on real estate transactions and developments within the elderly care sector, activity underpinned by a projected 22.6% growth in the elderly population by 2035 and the fact that more than 65% of NHS patients over the age of 65 have dementia.

The discussions also followed publication of a report in March by Knight Frank, which revealed that care home supply in 2024 grew by just 86 beds – or 2.9% – despite the population of over-65s increasing by 20.7% over the same period.

Crunching the numbers

This massive shortfall in bed numbers is prompting growing interest from financers and developers looking for prime sites and assets across the country, as well as existing operators exploring opportunities to expand existing homes.

Haines said development activity showed 93% of new care beds delivered between 2022-2025 were in new-build, purpose-built care homes, up from 18% pre-1990, when the majority of activity was conversions.

And, in the past five years, the average size of each care home development has also increased, with new, purpose-built homes averaging 65 beds in the five years to 2025, compared to 44 beds pre-1990s.

The development pipeline shows a shift towards the North and South West of England and much of the work, particularly conversion and expansion work on existing homes, is revolving around creating wetroom and ensuite facilities.

“Most care homes used to just have wash basins in bedrooms, but now have ensuites and we are moving towards full wetroom provision, and this increases the size of bedrooms by another 3-4sq m,” Haines said.

This increase in room size, and the high cost of building materials and labour, is putting pressure on the system and prompting some caution among investors.

 

A light on the horizon

But Haines predicts the market will see a revival, with land values for quality, consented sites holding firm and increased confidence and liquidity in capital markets.

“When we do viability as part of the planning process, we will look at the local demand, the fee market, and the return on investment after build costs,” said Haines.

“Moving forward over the next 10 years we do expect to see activity in the later living market ramp up, but to make some of these developments pay, it may be that they are smaller in terms of bed numbers, but aimed at residents with higher needs so the figures add up.”

Construction trends in the care home sector were further discussed in a session led by Allan Wilén, economics director at construction industry data and project intelligence provider, Glenigan.

He revealed that the time taken for construction projects to progress had increased significantly in the past five years, with the time from detailed application to planning consent increasing by nearly 50% since 2019.

Building material and labour costs also shot up as a result of the COVID-19 pandemic and the war in the Ukraine.

He said: “There has been a recovery in care home projects, although not to earlier levels.

“However, there is some strength in project approvals and development pipelines and that bodes well for the future.

“We seem to be in a more-stable position now, albeit at a higher price level, but it is easier to cost projects with more confidence of the price.

Key regions for care home development approvals, he added, are in the South East, West Midlands, East Midlands, and the North West.

Development opportunities and challenges

To give a developer’s view on the markets and the challenges and opportunities moving forward was Will Bilbrough, development director at Prime.

He said: “The care home sector is challenging and there are a lot of systems and processes to delivering a successful project.

“Maintaining project viability is key and the biggest risk is time.

“Anything that holds up the process is a nightmare for developers.”

Key to delivering successful projects, he said, include:

• Understanding project-specific requirements and ‘operator fit’, including dependency levels, requirements for specialist care, accommodation types and style, requirement for day space, and amenity areas etc
• Understanding the impact of the development on existing health and social care services and local authority budgets,
• Undertaking a needs assessment, with analysis of demographics and market catchment areas to establish existing supply and planned supply
• Carefully assessing care home and residential property land values – land values vary significantly by region, but construction costs often don’t
• Identifying sites and routes to securing/acquiring the land
• Site accessibility and transport links
• Know the local market, do your diligence and plan well
• Whether to opt for new build or refurbish/extend. Existing properties can be less efficient and less able to respond flexibly to delivering modern care now and in the future and investors may be less interested in outdated ‘older’ stock with a limited lifespan

But the current planning system came in for criticism as speakers lamented the long wait times.

Bilbrough said: “It can take months, sometimes, years to get projects through planning and that creates huge risk for developers.

“Managing the planning process is critical and, for us, that means undertaking robust pre-application analysis and being clear as to why there is a demand for any development.”

Richard Hornsey, senior director for health and social care at Virgin Money, said there was still appetite among investors, telling delegates: “No doubt the demand is massive, but costs are going up and profits are going down.

“It is costly to build a care home, so investors need to make sure the numbers add up.”

He said the cost of a 78-bed new-build care home in the East Midlands in 2015 was £80,000 per bed, excluding finance. An 86-bed new-build development in West Yorkshire in 2024 came in at £147,000 a bed to complete.

This huge leap he put down to changes to building regulations, technology, uplift in the desire to create more-uplifting internal and external environments, and cost inflation across all areas.

Generally, he said, new developments are on average 40-70sq m per bed, with construction costs of anywhere between £2,000-£3,000 per sq m.

Funding options

Hornsey said: “Funding is available from specialist development funds. How much cash you can borrow and how much you will need to put in depends on who you go to.

“We have been very successful with special purpose vehicles (SPVs), which can expect funding of between 65%-85% – the higher the percentage, the more expensive the debt.

“But if you are a big care group you can go to your existing bank and leverage off that and can maybe borrow up to 100% of the cost.

“You have got to consider the equity stake and how much you have.”

Also speaking on the issue of funding was Jimmy Johns, director of healthcare at Christie Finance.

He revealed an increase in new market entrants and an increase in transactions by small and medium-sized groups.

Increasing staff costs were also impacting on pricing structures and development costs.

Designing for life

The forum also heard about the impact of design on the success of care home developments during the Architects Expert Panel, fronted by Clare Cameron of PRP Architects and Melissa Magee from Carless + Adams.

Magee said: “We have to collaborate and innovate and learn from each other.”

Key is creating spaces that meet the needs of all residents and ensuring all parts of the building are accessible and comfortable for those with additional needs, such as dementia.

“It’s about education and understanding the user,” said Magee.

“Design has evolved from the intimidating and institutional, clinical and sterile environments of the past to buildings which create opportunities for people to thrive.”

But both speakers said that issues and delays with the planning system often frustrated efforts.

And they insisted that flexibility in design was crucial.

Magee said: “There isn’t really any clear design guidance for care homes and I would welcome some parameters we can all work to so people getting into the care sector can have confidence.”

Cameron added: “The CQC standards for design are pretty limited and not enough to inform good design, in my opinion.

“And the HTMs and HBNs only really kick in in healthcare projects.”

They provided case studies of projects they have worked on where more-supportive and flexible environments have been created.

Alongside the speaker sessions, the forum provided a platform for service and product suppliers and manufacturers to meet with investors, developers, and owners through a series of pre-booked meetings.

One delegate said: “Having so many meetings in a single day is a great way to maximise your time and to make connections.”

Event organiser, Nexus Media Group, publisher of Healthcare Property, is planning two more Healthcare Property Forums around the country this year.

The next event will be on 8 July at Savoy Place in London and will once again be collocated with the Caring Times Owners Club.

There will also be a third event at Celtic Manor in Newport on 18 September.

To find out more about how you can attend, or to express an interest in speaking in one of the sessions, please click on the links above or visit Nexus Media Group.