HEALTHCARE

On Friday 16 September, the Integral Care Agreement (IZA) was concluded. The IZA was broadly supported and signed by ActiZ, the Dutch Mental Health Association, the Federation of Medical Specialists, InEen, the Dutch Federation of University Medical Centres, the Dutch Hospitals Association, the Dutch Patients Federation, the Association of Dutch Municipalities, the Dutch Nurses and Carers Association, Independent Clinics in the Netherlands, ZorgthuisNL, the Dutch Health Insurers and the Ministry of Health, Welfare and Sport. In the IZA it was agreed, among other things, that parties will cooperate more intensively with each other, primary care will be strengthened and there will be more focus on prevention. It should also be and remain attractive for healthcare providers to work in healthcare. Healthcare real estate can contribute to the ambitions from the IZA by housing local health centres and with housing that allows longer living at home, with attention to the well-being of residents and buildings that contribute to green and climate-neutral care.

An increasing number of healthcare institutions are already or will soon be in financial difficulties. This is the finding of accountancy firms BDO and EY based on analyses of annual reports for 2021. A survey by Finance Ideas among healthcare financiers on financial expectations for 2022 shows a similar picture. In some cases, this may put pressure on the financial continuity of healthcare institutions.

Some of the problems are structural in nature. Healthcare institutions face labour shortages due to absences and departing staff. Hiring expensive external workers is increasing costs. This is a serious financial problem, but it also threatens the accessibility and quality of care, according to regulators NZa and IGJ. Purchasing costs have also risen due to inflation and high energy bills, and index-linked leases bring additional costs. In 2020 and 2021, government ‘covid-compensation’ measures still contributed to the result, but these are slowly being phased out. The recalibration of the so-called normative housing component, which was covered in the Investment Update August 2022, reduces the income from the capital cost reimbursement of real estate.

The gloomy financial outlook is not yet leading to additional bankruptcies. The decline in bankruptcies in the healthcare sector in the second quarter continued in the third quarter. A particularly strong decrease was visible in the 'care' and 'welfare' segments. The number of bankruptcies in the care sector remains very low. Due to the financial and economic uncertainty, the investment climate for healthcare institutions is deteriorating. Investments are being postponed or downsized. Investors in healthcare real estate should be alert to the financial position of healthcare institutions that rent. At the same time, investors can play a positive role in the challenges facing healthcare real estate.

While changing market conditions are not yet directly reflected in transaction volume, this is the case for prime gross initial yields. For curative real estate, such as primary and secondary care real estate, prime gross initial yields have demonstrably increased in the past quarter. For residential-related healthcare real estate, prime initial yields have remained stable in the past quarter. There are signs that, following in the footsteps of other property segments, an upward movement will take place here, too, in the coming quarters. This will especially be the case for new projects and transactions not subject to past deals. The attractive investment characteristics of healthcare real estate, such as its relative insensitivity to economic fluctuations and the potential for making a positive impact, continue to generate above-average investor interest. Nevertheless, even healthcare real estate will not escape general investor caution (see also ‘outlook’).