CBRE
Jan Linsin - CBRE
Jan Linsin, Head of Research Germany at CBRE.
As investors become more specialised and seek value in niche sectors, one sector which was tipped to soar last year in Germany was the managed healthcare sector, which has been drawing a lot of attention of late. It didn't quite match volume expectations last year, nor reach property advisor CBRE's forecast €1bn in transaction volume for the full year.
Still, CBRE points out in a recent report, offering attractive yields of up to 6.25% and a solid fundamental outlook, investment in nursing homes and senior residences in Germany did at least continue its seven-year growth trend last year, climbing 3% to €834m. This is the second-highest volume ever, trailing only the boom year of 2006 when €1.2bn of deals were transacted.
Interestingly, nearly half of all deals happened in the last quarter, and portfolio deals jumped strongly (nearly 65%) over the previous year.
According to CBRE's head of research Jan Linsin, “The nursing home asset class has established itself and the further rise in transaction volume shows the increasing interest from domestic as well as international investors in this alternative asset class.” Last year, deals were driven by portfolio acquisitions by North American and Scandinavian investors.
Open-ended property and Spezialfonds, and asset and fund managers were responsible for over 70% of deal volume. “Investors from Germany and abroad are increasingly looking at health and social property as an asset class independent of economic cycles,” said CBRE's Head of Real Estate Finance Dirk Richolt. Specialised fund managers and listed firms in particular are counting on ageing demographics to produce rising demand for professional nursing services.
Operators are reporting rising utilisation rates and many have renewed leases on the back of strong performance. “This has removed some saleable product off the market again, as the general sales pressure lessened and owners are happy with their existing investment,” said Richolt. Investor demand is outstripping supply so that transaction figures could have been higher with more available product, he said.
Linsin also pointed to the sector's initial prime yields of 6.25%, which outstrip the risk-less reference interest rate by 5.6%, the more management-intensive hotel sector by 1.25% and prime offices by 2.13%. This is the same level as 2014, although down on the 7% avaiable in 2013. Linsin sees this falling again this year towards 6%, but says this yield compression is much less pronounced than in other top products such as downtown retail or office properties.
