The crisis-hit NHS and supply-starved UK housing market could have a cure for one another.
NHS chairman Sir Malcolm Grant said in a Cambridge University Land Society lecture on 25 March that the provision of healthcare is changing at a faster rate than hospitals and clinics can provide for. Because of this, total wasted space across the service adds up to 20.5m sq ft – bigger than London’s Hyde Park.
With a shortfall of more than 1m homes in the UK, a government push to plug the gap, and developers turning to the residential market for quick returns, the surplus NHS property provides some exciting prospects for the housing sector.
NHS Property Services, which was set up in March 2013 to make savings on the NHS estate, has control of 4,000 assets valued at £3bn from around 160 abolished primary care trusts and 10 strategic health authorities.
It has pledged to sell more than 200 properties by April 2015, raising £100m in capital receipts.
Overlooked sites
But critics have suggested that the sites with best potential for development are being overlooked.
According to James Leaver, head of public sector property at Knight Frank, breathing new life into parts of the NHS estate will take “imaginative” developers.
He argues that the more testing parts of the estate are often the older listed Victorian properties that are not suitable for modern healthcare. Conversely these are the best for residential redevelopment. However, they are not necessarily the properties that have been brought to market so far.
“It is perverse that the old Victorian hospitals are a part of the estate that presents the greatest challenge to the NHS because they convert well to residential,” says Leaver.
“They have highways access, service access, and a number of them are quite attractively landscaped, so offer a good environment for housing.”
Agents say the NHS has so far taken a scatter-gun approach to sales with no consideration of grouping together potential portfolios for disposal.
Savills’ head of public sector consultancy Alex Dawson says NHS Property Services is still getting to grips with the assets it has inherited.
“Once it fully understands the estate, there are huge opportunities to be released,” he says.
Great opportunities
“It has some great opportunities that remain vacant, which with a co-ordinated strategy, could be released sooner.”
But there have been some success stories. Helical Bar and Baupost Group paid Barts and the London NHS Trust £55m for the 2.3-acre site in 2011, rising by up to a further £35m upon securing planning consent at the end of 2012 for a scheme including 225 flats, 230,000 sq ft of offices and 27,000 sq ft of shops.
Barratt London, meanwhile, is redeveloping the former the St Andrews Hospital in Bromley-by-Bow, E3, as a 964-home development.
Redrow London managing director James Moody says: “NHS sites are well located, in good, strong-community areas and make ideal residential and mixed-use developments.
“When you look at the mayor of London’s aspirations [for 42,000 new homes a year in the next 10 years], we need more public sector assets.”
By 2020 the NHS will require £30bn – 25% more than it receives at present – to maintain services. As part of a major reorganisation, Grant says the NHS is now considering providing its services in schools, shops and pharmacies. And this has the potential to raise money from more sales and free up more sites to keep house builders interested.
rebecca.kent@estatesgazette.com
