A potential $200 bn (€175 bn) could be invested globally in healthcare property in the next five years and Europe is the primary focus, according to a report by Octopus Healthcare.
Based on a survey of 100 institutional investors, the report also finds that lack of relevant skills and resources within investors’ organisations, regulatory issues relating to healthcare, and relationships with operators, particularly with respect to corporate governance, are barriers to investment.
The survey’s headline $200 bn number is based on the desire of investors who already have capital deployed in the sector to increase their current average portfolio allocation to the sector of 6.1% to 9.5% by 2023.
Insurance companies will increase their allocations to a higher percentage than the other categories of investors surveyed: fund of funds, HNW family offices; pension funds, strategic investors and private banks. Insurers currently allocate 7.1% and would like to increase that by 4.4%, to 11.5%.
Asian investors already have the highest allocation, at 10.6%, while Australian investors plan to increase investment by the biggest margin, 5.3%, off the lowest base, 4.1%. Some 73% of UK respondents said they will increase allocations. The survey does not cover North American investors.
Nordics top target
The UK, Germany and France were the three countries where investors already have the biggest allocations, followed by Japan. The Nordics is the European market targeted for consideration by the highest percentage of investors, 40%, followed by France with 32%. ‘The research also reveals a degree of bias. Investors prefer to invest in their home market,’ Octopus Healthcare says.
Diversification, the demographic trend of increasing life expectancy and long-term income and attractive risk-adjusted returns were cited as reasons to invest.
For the purposes of the survey, healthcare includes retirement housing, care homes and doctors’ surgeries.
Octopus Healthcare manages a UK healthcare property fund which converted to an open-ended structure last year. Last month the fund raised £187 mln (€210 mln) more equity.
Hiti Singh, head of institutional funds at Octopus, said: 'The expected end of the market bull run, coupled with heightened political risk across the globe, is driving institutions to alternatives in a hunt for returns.’
The company is a subsidiary of private venture capital firm the Octopus Group.
