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As Germany’s ageing population fuels demand for care facilities, the healthcare property market stands out as a promising yet complex opportunity for investors. With 2024 transaction volumes ranging from €973 million to €1.3 billion depending on the source, the sector has proven its stability amid shifting market dynamics. However, challenges such as staff shortages and limited high-quality assets present hurdles that require careful, strategic responses from market participants.
Despite a modest decline in some figures, the market remained active, with nursing homes leading the charge. Savills reported a total transaction volume of €1.1 billion, 12% lower than 2023, but with a robust fourth quarter contributing nearly half of the year’s total. Similarly, Cushman & Wakefield highlighted a strong year-end with a total of €1.3 billion, a 28% year-on-year increase. Notable transactions, such as the €300 million acquisition of the Katharinenhof Group by Civitas Investment Management, demonstrated sustained interest from international investors.
Prime yields remained stable across the board. Nursing homes held steady at 5.2%-5.4%, assisted living at 4.5%, and outpatient facilities at 4.75%. While yield stability underpins the market’s appeal, it also signals limited room for immediate high returns.
Foreign investors responsible for more than half of all transactions
The market’s appeal to international investors continues to grow. CBRE noted that foreign investors accounted for 57.5% of transactions in 2024, a significant rise of nearly 40 percentage points. Asset managers led the charge with €491 million in transactions, followed by the public sector and corporates.
“International players see Germany’s healthcare property sector as a long-term growth opportunity,” said Jan-Bastian Knod, Head of Healthcare Advisory at Cushman & Wakefield. “The lack of available product, especially in the new-build sector, pushes investors toward development projects and value-add assets.”
Savills echoed these sentiments, highlighting that international entrants are leveraging opportunities as established players focus on existing portfolios and ESG compliance. “New international investors are creating movement on the buyer side, but supply limitations mean market recovery will progress incrementally,” said Max Eiting, Head of Healthcare at Savills Germany.
Shortage of nursing staff a bottleneck for new developments
The sector’s growth faces notable hurdles, particularly a shortage of nursing staff, which acts as a bottleneck for new developments. “While investment cost rates in southern Germany have reached levels that could theoretically support new construction, the lack of skilled operators and staff remains a significant barrier,” Eiting explained.
Replacement builds have emerged as a practical solution, offering lower start-up risks as staff and residents transition to updated facilities. However, project developments accounted for just 5% of transaction volumes in 2024, a steep decline from the five-year average of 21%.
On the regulatory side, ongoing hospital reform and the need for stable financing systems add layers of complexity. Tim Schulte, Senior Director at CBRE, remarked, “The market’s trajectory will hinge on how policymakers address structural financing and labour shortages in the coming years.”
The consensus among brokers points to a cautiously optimistic recovery in 2025. Larger portfolio transactions are anticipated, with value-add opportunities and forward deals gaining traction. Yield compression is possible in the second half of the year, contingent on financing improvements and sustained investor interest.
“We expect transaction volumes to surpass 2024 levels, though still below pre-interest rate reversal benchmarks,” said Marco Schnell, Head of Investment Advisory at CBRE. Cushman & Wakefield’s investor survey revealed expansive strategies from family offices, private equity, and REITs, suggesting continued liquidity across sub-asset classes.
For institutional investors, as always, building partnerships with seasoned operators can help manage the unique operational challenges of the sector, while prioritising established assets may offer greater security in the short term. At the same time, emerging areas like outpatient healthcare properties hold potential for those willing to think long-term, even if current opportunities in this sub-segment are scarce.
Germany’s healthcare property market remains a complex but rewarding space, underpinned by demographic shifts and growing international interest. For investors with the patience and expertise to navigate its hurdles—from staff shortages to regulatory challenges—the sector represents a stable and increasingly vital pillar of the real estate landscape.