As property indices around the world indicate that commercial markets are beginning to return to strength,
investors are increasingly looking to take advantage of the opportunities this presents. Recovery is set to continue, led primarily by improving economic conditions in traditional countries and strong growth in emerging markets.
Property consultants Cushman and Wakefield recently claimed that the total global investment volume for commercial real estate climbed by 42 per cent over the course of 2010. But with offices, warehouses, retail centres, hotels and land to choose from where can investors find the best returns.
One such area that could prove to be an untapped goldmine for buyers is residential care and nursing home investments.
With a large number of decent and supportive nursing homes available, there are plenty of attractive opportunities for return on investment. Indeed, the demand for residential care homes and nursing homes continues to grow and with senior citizens now making up an increasing proportion of the population in the UK, it is easy to see why.
According to statistics from the last UK census (2001), over a fifth of the population are now aged 60 or over. As more of them chose to live in a retirement home, it is making them an increasingly profitable venture.
Timothy Lambert, head of consulting at Ducalian, agrees, adding that new government legislation means that many publically-run care homes are no longer meeting required standards.
"A lack of bank lending for new construction in this sector means it is being opened up to private investors and funds to take advantage," he said. "With the NHS often paying more than 50 per cent of the revenue per home, the market is captive and a lot more secure than the more volatile commercial end of the spectrum and buy-to-let."
With a larger proportion of residents and their families now being made responsible for funding of their care this has lead to much higher expectations on the quality of the accommodation and standards of care than what would have previously been acceptable.
In consideration of the country's society population development, retirement homes could be considered to represent a golden opportunity, especially under current economic conditions.
As people live to greater ages, the demand for residential care and nursing home will be on the increase. Diminishing investment by the NHS and local authorities into the sector has promoted a growth in privately-operated social care.
Indeed, Lambert explains that increasingly sophisticated private investors working in partnership with operators are taking advantage of the opportunities available in the sector.
"Investing in care homes is increasingly popular with young people looking for longevity in their passive income. We know the market is captive, and whilst people are working longer they are also living longer and need quality care far later in life than retirees needed a generation ago," he added.
This is turn has led to noteworthy growth in the private care sector within recent years. And the demand for places in care and nursing homes shows no signs of abating and is predicted to register a significant increase in the long-term.
Nursing homes and care homes are considered to be low-risk commercial lending.
Many commercial lenders will recognise the strength in this property sector and this is widely reflected in the rates these lenders can offer. Although Ducalian advises that, as with any investment, caution is exercised before investment.
"Only invest in care homes if you know the track record of the operator. If their quality of care is poor, this will affect your returns, not to mention the ethical implications," Lambert added.
"Investing wisely in this market can carry very strong returns and is arguably the best performing asset class in property and only due to get stronger as the baby boomers start to retire."
- Friday 01 April 2011