Care home market trends - a leading property consultant's perspective

People’s expectations of what they want from a care home are changing and this is dramatically impacting on the care home market.

Image: Richard Lunn, director and head of care at property consultants, Christie + Co

In recent years, there has been a shift in demand with more care home providers wanting a higher quality of care home with features such as en suite bedrooms, says Richard Lunn, director and head of care at property consultants, Christie + Co.

“This means we are seeing older stock fall in value and released to the market as operators increasingly seek to acquire new-build stock and refresh their estates,” he adds.

Mr Lunn sees a growth area being specialist homes for people with brain injuries or dementia.

This is borne out by an NHS study, published by the National End of Life Care Intelligence Network, which predicts the number of elderly people with dementia will increase by 70 per cent to more than one million in the next 20 years.

Christie + Co believes fees and margins will continue to be squeezed over the next year.

“Care homes are very dependent on occupancy and fee income and all that is under pressure at the moment. We will see distressed sales over the next year because of the pressure on care homes caused by the level of fees being paid by local authorities,” says Mr Lunn.

“A cloud that hovers over the care sector is the perennial issue of funding. Once again we have seen operators’ costs outstripping fee increases paid to them by local authorities. An operator’s ability to control costs and provide quality in an increasingly competitive marketplace will be key,” he adds.

Last year’s Southern Cross situation dominated the sector, however it was not all doom and gloom, according to Mr Lunn.

“The combination of the Southern Cross scenario and the uncertainty of the financial markets did lead to a slow-down of major corporate transactional activity — but this was more than offset by the second market, local individual deals.”

The key fact about the Southern Cross situation, says Mr Lunn, was that it was resolved by the industry.

“No one was put out on the streets. The industry came together to deal with the issue and all the homes were successfully transferred in a consensual and solvent manner,” he says.

In terms of its sustainability, he believes the care sector can continue to thrive as long as it is properly funded.

“All sectors require stability and certainty – care homes are no different. To succeed at the moment, care home owners need to target the private fee-paying market and not be so reliant on local authorities’ fee structures. A combination of private payers and fair local authority funding will allow operators to meet costs and build the brand new homes that both they and care home residents increasingly demand,” he says.

Image: Richard Lunn, director and head of care at property consultants, Christie + Co.