Real Asset Insight #6 June 2020

Insight & Strategy - Healthcare & Senior Housing
Consolidation trend accelerates
as crisis hits smaller operators
Larger groups likely to expand across Europe as rising
costs and access to financing take toll of independents
‘There will be a
societal bonus
for healthcare, as
governments feel
they owe a debt
to the sector.’
Geert Wellens, Triginta
Real Estate Fund
The global pandemic has accelerated an
existing trend for consolidation and
geographical diversification in Europe’s
healthcare sector.
Increasing difficulties for smaller and weaker
players, with credit ratings being damaged and
the risk of bankruptcy from dips in occupancy
and increases in costs means ‘there will be
consolidation in the sector, because size matters
in healthcare’, says Kees Zachariasse, managing
director Netherlands of Cofinimmo.
‘In the longer term, increased regulatory scrutiny
will increase the speed of consolidation in the
sector,’ says Frédéric Dib, president of Mozaic
Asset Management. ‘More independent operators
are likely to exit the business, because it is so
difficult to deal with a crisis on your own.’
NO SIGNIFICANT IMPACT
The larger operators will expand and diversify,
he adds: ‘There will be a small dip in profitability
for the established groups but no significant
negative impact. For the small independent
operators, however, it will be a different story.’
There are opportunities throughout Europe.
‘Nursing home consolidation is a big opportunity
in Italy, Spain, the Netherlands and Ireland
where the market is still fragmented,’ says Dib.
‘In Germany the process of consolidation has
already started but it is still ongoing, while in
France it’s been done.’
Larger groups also find it easier to get financing.
‘The sector will be able to finance itself, also
thanks to government and central banks’
interventions,’ says Geert Wellens, partner at
Triginta Real Estate Fund. ‘There will be a
societal bonus for healthcare, as governments
feel they owe a debt to the sector.’ But private
capital will be needed to build the infrastructure,
he adds.
‘Governments have been putting huge amounts
of money into the economy, with a massive strain
on public finances,’ says Keith Harris, executive
director operational real estate, at CBRE. ‘There
will be a push by every country to get more
private sector capital into healthcare, and real
estate is one obvious way of attracting capital.’
Financing opportunities for development are
easier to come by, reflecting confidence in the
sector’s long-term prospects. ‘Debt from banks
and mainstream lenders is virtually non-existent
now for investment plans,’ says Harris.
‘However, the development market is open,
because people know the crisis won’t last
forever so the feeling is that the market will be
efficient and functional again in one or two
years, when the new developments would be
coming on stream.’
‘Tens of thousands of quality beds will
be needed every year in Europe at least
until 2035.’
Keith Harris, CBRE
break-even. It just shows how resilient the
sector is.’
In a snap poll of experts at the online
briefing conducted by Real Asset
Media, 62% of respondents think that
senior housing and healthcare will grow
significantly as a sector post-crisis and
38% believe it will continue growing at the
same levels as in the recent past.
‘Covid-19 has shown that healthcare is
more important than ever for society,’ says
Ron van Bloois, partner at HEVO. ‘Looking
at demographics and fundamentals, it is a
real safe haven for investors.’
In future there will be more focus on safety
as well as quality. ‘The next generation
coming to healthcare facilities will be the
baby boom generation, which has higher
expectations in terms of facilities and
technology,’ says Geert Wellens, partner at
Triginta Real Estate Fund. ‘Investors will
put pressure on providers to increase the
quality of space as well as care’.
Issue 2 July 2020 | Real Asset Insight 55