New study on German nursing homes highlights new-build need

A new study on the German market for managed care homes (highlights the gap between supply and likely future demand, and concludes that an additional 255,000 beds will be needed by 2030, at a cost of at least €25bn.

The "Pflegeheim-Atlas 2016" is published by the Berlin-based real estate consultancy Wüest & Partner Deutschland together with research group Ottenströer Immobilienwirtschaft/Regionalökonomie, and examines in detail on a region by region basis (more than 400 separate municipalities) where individual demand for nursing homes and managed care places will emerge in Germany between 2025 and 2030.

The study forecasts that in fourteen years, i.e. in 2030, a total of 3.6m people in Germany will need managed care. Given Germany's aging population, that is about 930,000 more than in 2014. Of these 3.6m, about a third or 1.2m people will require in-patient care in a nursing home. To meet this need there are currently 13,030 nursing homes with capacity for 900,000 beds. The difference is going to have to be made up by new construction and refurbishment of existing facilities, concludes the report.

On demographic grounds alone, says the study, up to a further 300,000 places will be required by 2030. This boom in demand is likely to continue through to 2060, after which the old baby-boomer generation population bulge finally thins out.

In concrete terms, at least 2,550 new nursing homes with 100 beds apiece must come on stream by 2030 to meet the coming existing demographic demand – a rise of 28% on current supply. Wüest & Partner and Ottenströer estimate an annual new-build requirement of 17,000 beds, whereas about 14,000 have been coming on stream annually in recent years. The take-up rate of 85-90% has been so high, however, that new demand is going to have to be met by new building, rather than just refurbishment of existing facilities. Here, however, strong regional differences have been noted, says the report.

The highest additional demand will be in Berlin at 11,800 beds and in Hamburg with 4,100 additional places by 2030. Berlin alone has currently 112,500 elderly people in care, of whom about 30,000 are in managed-care homes. Most such homes are about 90% occupied. Wüest & Partner CEO Karsten Jungk pointed out in a telephone conference that by 2030 there will be about a quarter of a million people aged 80 and older living in Berlin, along with 566,000 aged between 65 and 79 years old. About 163,000 of these are estimated to likely in need of care.

Munich and Cologne will each need a further 2,000 beds, while Bremen, Dresden and Leipzig will each need to boost their capacity by a further 1,500-1,700 beds to meet demand. The federal states with the greatest needs of new beds are North Rhine-Westphalia, Bavaria and Baden-Württemberg. In proportion to its existing supply, the state of Brandenburg surrounding Berlin will have the most catching-up to do, needing at least 50% more beds.

Volker Ottenströer of the research group which produced the report along with Wüest & Partner commented on the methodology used in compiling the "Pflegeheim-Atlas 2016" report. "If we had simply extrapolated factors such as existing in- and out-patient care, we would have arrived at a figure of 320,000 additional beds required. However, we've discounted the figures by 20% for two reasons, among others.

"The first is that a lot of people nowadays as they grow older, remain healthy longer. So the need for managed care in the individual age categories, of 70-80, or 80-90, could actually fall.

"Secondly, efforts to specially develop housing for older people along with complementary social services could contribute to many more older people continuing to live at home for longer." Ottenströer referred here to a new paper recently submitted to the government by the ZIA Zentrale Immobilien Ausschuss, the central lobbying group for the German real estate industry, which contains ideas and fresh demands for the construction of 2.9m elderly-friendly dwellings by 2030, at a projected cost of €50bn.

Wüest & Partner CEO Karsten Jungk estimates the required investment volume to meet the future demand at €25.5bn, or a cost of about €100,000 per bed. With most new supply likely to be provided by private capital, investment in the sector is still interesting, he says, although a very specific analysis of local market conditions is key to avoiding mistakes.

Growth in demand overall is likely to continue through 2060, but Jungk warns that much will depend on the balance between new nursing homes and sufficiently adapted housing to meet the needs of elderly people. He points to the 1.86m elderly people, or two thirds (71%) of those currently in care, who are looked after in their own homes.

"When planning new nursing homes the operators should absolutely think about the long-term and consider the possible conversion of the property into apartments or a hotel, with manageable sizes and good urban locations being key factors in assets requiring later adaptability," said Jungk.

The full study is available for downloading at www.wuestundpartner.com/deutschland.

The figures produced by the Wüest & Partner and Ottenströer study differ in their forecast from another prognosis issued at the end of last year by the Rheinisch-Westfälische Institut für Wirtschaftsforschung (RWI) in its Pflegeheim Rating Report 2015. The RWI forecast demand for an additional 321,000 in-patient beds, and put the cost at an enormous €80bn.

A further study, produced last year by Frank Löwentraut, the CEO of the Bad Homburg-based advisory group Aaetas Consult, forecasts much lower demand than either of the other two. Löwentraut foresees an additional demand by 2030 of 120,000 beds in new-built homes, and a further 50,000 in existing properties that will need upgrading and modernising. His total comes to 170,000 new beds over the period.