Care and Healthcare Real Estate

Strong demand, capacity constraints and attractive demographics

Market environment

The demographic changes in Germany continue to pose major challenges for society, for the economy and the labor market.

As the population in Germany continues to age, the care of older people becomes increasingly important. If we look back to 1999, there were two million people in need of care* (*coincides with the start of the collection of care statistics from the German Statistisches Bundesamt); fast forward to 2018 and we have more than 3.9 million people in Germany who were in need of care. Based on data from the Federal Statistisches Bundesamt and calculations by the Bundesinstituts für Bevölkerungsforschung (Federal Institute for Population Research), a further increase in the number of people in need of care is expected, taking the numbers to more than 4.1 million by 2030 and more than 5.3 million by 2050.

Number of people in need of care by age group

* Assumptions: constant age and gender-specific care rates in 2017; Population development according to variant 2 of the 14th Bevölkerungsvorausberechnung. Data source: Statistisches Bundesamt; Calculation: BiB; Representation: Quandriga

According to forecasts, around 340,000 additional care places will have to be created by 2030 in order to meet the increasing number of people in need of care. The replacement requirement for existing, but no longer marketable facilities, is estimated to be approximately 210,000 beds. The necessary investment volume to create sufficient and needs-based care capacity (beds) by 2030 is estimated at around EUR 55 billion.

In addition, it is important to note that the German population, with its continent-wide lead in savings on a per capita basis, maintains a relatively high capacity to fund the varying stages of care over time.

Care and Healthcare Real Estate is increasingly in the focus of investors

Both private and institutional investors have increasingly favored this asset class as an investment segment in recent years.

In 2019, according to the global real estate service provider CBRE, EUR 2.1 billion was invested in the German transaction market for healthcare real estate. The majority of the investment activities of around EUR 1.2 billion were in nursing homes, followed by retirement homes and residences (EUR 470 million) as well as medical centers (EUR 263 million) and clinics (EUR 135 million).

In particular, the increased interest of institutional investors has contributed significantly to this dynamic development. Professional investors in general have increasingly recognized nursing homes, assisted living facilities and other healthcare properties as an opportunity-rich, non-cyclical asset class for their portfolio - and that of their customers. Interest has grown considerably among infrastructure and real estate investors alike, with a strong preference for attractive and stable long-term cash flows.

Key features of investing in Care and Healthcare Real Estate in Germany

  • Non-cyclical real asset investment

  • Strong demographics and capacity constraints

  • Income security through long-term leases

  • Adjustment of inflation through rent indexation

  • Maintenance expenses usually with the operator ("Dach und Fach" regulation)

  • Quality control by asset management and authorities

  • Attractive return characteristics

  • Socially responsible investments