Total returns in healthcare will be among the highest in property over the next five years, rivalling those in logistics, according to research from Savills.
Average annual returns for care homes are expected to be 9.5% – just 20 bps below the 9.7% forecast for urban logistics, which is widely considered to be one of the most attractive sectors in property for investors.
Independent hospitals and primary care are right behind care homes, at 8.8% and 7.7% respectively.
Though the healthcare sectors are forecast to have some of the highest total returns, retail warehouses are expected to have the highest annual income return, at 5.6%.
Regional offices are also forecast to post a 5% income return, although capital growth will be a muted 1% per year.
Chris Wishart, healthcare director at Savills, said: “Offering a combination of secure income streams from a variety of sources, such as the NHS, local authority and self-funded markets, healthcare assets are now seriously competing with the more mainstream investment markets.”
Prime care home yields have tightened by 100 bps in the past 12 months to about 4%, and Savills said it expects them to fall further this year – though not at the same pace – because of the income security associated with the asset class.
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