Nursing homes proved a solid investment in Ireland in 2022, and trends suggest that their fundamentals remain robust, according to new research from CBRE.
The year 2022 saw a record amount of nursing home investment transactions in the Irish market. This came despite the issues faced by the sector from an operational perspective in 2022. Challenges such as the impact of rising energy costs, rent increases (linked to CPI) and labour shortages and costs.
According to Maureen Bayley, director of the healthcare team at CBRE Ireland: 'From an operational standpoint, Irish nursing homes endured a difficult year in 2022.
'Static revenues, alongside rapidly increasing energy and staff costs, put significant pressure on smaller nursing homes in particular and 16 closures were witnessed nationwide in 2022.
'Transactional activity in the nursing home sector in Ireland continues to emanate from European operators backed by real estate investors growing their foothold in the market.'
Due to the limited availability of good quality standing stock, the report suggests that investment into the development of purpose-built, future-proofed homes will prove an increasingly popular pathway to bed acquisition.
'However, what Ireland lacks is healthcare developers, and any that test the market with initial schemes require substantial capital in order to overcome barriers to economic development such as exceptionally high build costs, high land prices and weak viability of schemes outside of Dublin due to the mechanics of the Fair Deal rate system,' Bayley added.
Investor appetite for forward funding and forward purchase opportunities, coupled with yield compression in 2021 and early 2022, saw some new schemes completed. Looking into 2023, CBRE expects continued investor interest in the sector, given its defensive nature.
However the research warns that elevated construction costs and the increased cost of capital, alongside yield expansion, could prove a challenge to executing forward-structured transactions.
