Global Outlook February 2009.pdf - Grosvenor

Global Outlook February 2009
Chart 3: Germany is the largest market
$ bn
140
120
100
80
60
40
20
0
Spain UK Italy France Germany
Source: WHO, Grosvenor Research, 2009
Compared with standard commercial property,
healthcare property vacancy and rental rates are less
likely to exhibit the peaks and troughs of the property
cycle. Healthcare property can offer attractive
income returns. Although our analysis is limited by
data availability, anecdotal evidence suggests that
yields are relatively high, when compared to the main
commercial sectors. This is hardly surprising, given
the higher risk implied by this type of investment.
Prime yields should range are expected to be
between 7.0% and 9.0% for this kind of product.
Moreover, the healthcare market in Continental
Europe is characterised by long leases and offers
indexation, albeit maybe not at full rate.
As mentioned, investing in healthcare property is not, however, exempt from risks. The sector is still
quite illiquid and lack of transparency maybe an issue as legislation and regulation are rather different
across European countries. A specific risk of this sector is mismanagement risk, as it carries a severe
reputational risk. On the other hand, re-letting risk may be mitigated as a result of government concern
about continuity of services. These types of properties are also generally located in good central or
countryside locations, making it easier to change the use of the building.
This document is for general informative purposes only. The information has been compiled from sources believed to be reliable however its accuracy and
completeness are not guaranteed. The opinions expressed are those of the Research Department of Grosvenor Group Limited ("Grosvenor") at this date
and are subject to change without notice. Reliance should not be placed on the information, forecasts and opinions set out herein for any investment
purposes and Grosvenor will not accept any liability arising from such use. This document is intended for professional and non-private investors only. No
part of this publication may be reproduced in any form without the prior written permission of Grosvenor.