Irish care sector jumps hurdles to post record 2022 volumes

The Irish Nursing Home market saw record investment in 2022 despite the challenges faced by the operators in the sector, according to CBRE research.

According to the report, Irish Nursing Home Market Owners, Operators, Investment, these challenges included steeply rising energy costs, rent increases linked to CPI, alongside growing labour shortages and staff costs. 

According to Maureen Bayley, director of the healthcare team at CBRE Ireland there was significant pressure on smaller nursing home operators in particular and 16 closures were noted in 2022, nationwide.

She pointed out that investment deals in Ireland’s nursing home sector continue to originate from European operators, backed by real estate investors seeking to increase their foothold in the market. 

CBRE said that due to the limited availability of good quality standing stock, “investment into the development of purpose-built, future-proofed homes will prove an increasingly popular pathway to bed acquisition”.

However, Ireland lacks healthcare developers, the firm said, and any that test the market with initial schemes require substantial capital in order to overcome barriers to economic development such as exceptionally high build costs and high land prices.

Projects located outside Dublin have “weak viability” owing to the mechanics of the Fair Deal rate system, Bayley added.

However, investor appetite for forward funding and forward purchase opportunities, coupled with yield compression in 2021 and early 2022, did see some new schemes completed, she pointed out.

“Looking into 2023, we expect continued investor interest in the sector, given its defensive nature, however elevated construction costs and the increased cost of capital, alongside yield expansion, could prove a challenge to executing forward-structured transactions.”

Author: Paul Strohm

Source: Real Asset Insight