Christie & Co has reported a 14-year high in the level of demand and volume of care homes transacted by its care team in 2022.

The specialist business property adviser’s Business Outlook 2023: Finding Clarity report, which launches today, reports interest from a range of buyers, including a number of new European organisations who are looking to either enter the UK market or increase their presence.

Corporate investors accounted for 33% of Christie & Co completions in 2022, up from 22% in 2018. The organisation says this reflects the increasing use of sale and leaseback finance and a wide level of activity from a cross section of UK, US, and European REITS together with institutional capital.

In 2022, 48% of Christie & Co’s care deals were concluded to buyers located over 100 miles from the target business, up 19% since 2015, reflecting a national and international buyer base.

The report also finds that Environment, Social and Governance (ESG) is a key priority for investors within the sector, with operators embracing the opportunity to make environmental improvements.

As part of its annual price index, Christie & Co notes a 2.7% increase in pricing in 2022 which reflects a strong appetite for care, although this is tempered by increased interest rates, capital costs, and operational costs.

An anonymous survey of care market participants carried out by Christie’s found 30% are looking to buy in 2023, 26% are looking to sell, and 7% plan to both buy and sell. When asked about their sentiment for the year ahead opinion was split down the middle, with 34% feeling positive, 34% feeling negative and 32% feeling neutral.

The sector remains keen to borrow funds to acquire, expand or recapitalise. In 2022, the broker’s sister company, Christie Finance, completed on 12% more loans than in 2022.

Market Predictions

In the year ahead, Christie & Co expects:

• Demand for good quality assets and general buyer sentiment to remain strong
• The trend of an increasing number of operators taking leases is likely to continue
• Sale and leaseback finance will continue to underpin a notable number of transactions, although yields may soften as a consequence of wider macro-economic factors
• Occupancy should fully return to pre-pandemic levels by year end
• Workforce challenges and cost inflation are likely to remain as the two key operational headwinds
• More signs of distress will likely emerge, particularly for smaller older style assets which are reliant on local authority funding
• Further transactional activity in the OpCo market

Richard Lunn, managing director – care at Christie & Co, said: “The sector continues to be impacted by cost pressures and workforce issues – challenges not unique to care – yet 2022 demonstrated, yet again, the strength of both the sector and the market itself, as we saw record levels of demand and transaction volumes last year along with strong pricing. We remain optimistic for the year ahead that, despite headwinds, the care sector and its fantastic workforce will thrive.”