New research shows that the healthcare sector is continuing to grow in popularity for investors, and Australian assets are no exception.
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Knight Frank’s Global Healthcare Report found investors remain confident in the long-term buoyancy of the sector, despite economic uncertainty, with investment in care-related real estate reaching roughly $38 billion globally in the year to June 2023, accounting for 4.3 per cent of total real estate investments.
In Australia, healthcare assets have performed second only to industrial real estate, with average capital growth per year between 2017 and 2022 sitting at 6.8 per cent, just behind industrial, at 10.7 per cent.
Knight Frank’s national head of healthcare and life sciences in Australia, Sam Biggins, commented that an ageing demographic, coupled with the defensive characteristics of the sector, continues to drive confidence in the asset class.
“Institutional investment in Australia’s healthcare and life sciences sectors has gathered significant momentum in recent years, driven initially by domestic investors seeking defensive assets, and now sees strong market participation by regional and global sector specialists and their capital partners,” he said.
According to the firm, healthcare and health-related expenditures account for over $241 billion annually in Australia, which equates to approximately 10.5 per cent of GDP. Approximately 73 per cent of this is provided by the state and federal governments. Of the remaining $65.3 billion, an estimated $17.5 billion is contributed by private health insurers.
“The significance of this expenditure to healthcare real estate in Australia cannot be understated,” Mr Biggins commented.
“When considered in tandem with the fact that 23 per cent of the population will be over 65 years old by 2062, [it] provides strong support for investment across all subsets of the sector,” he said.
Encompassing approximately $22 billion in assets, Australia’s securitised healthcare real estate is dominated by several key players that include Northwest Healthcare REIT, Australian Unity, Dexus and HealthCo.
Specialist asset managers such as Centuria, RAM, Elanor Investors and Barwon Investment Partners are also actively scaling their participation in the sector.
And as the asset class has received increased interest, the healthcare specialist noted that the strategy and formation of investors are starting to shift, as is the typical composition of portfolios.
“A number of these groups have progressed from single asset, syndicate-style vehicles targeted at high-net-worth private investors and are now securing mandates from global institutional and sovereign wealth capital partners including MSREI, PNB and GIC,” Mr Biggins said.
“The portfolio composition of the smaller managers is maturing from smaller primary care and allied health assets to be more reflective of the portfolios of the larger institutional and global investors, with assets such as mental health, day, short-stay and tertiary hospitals.
“In 2023 we have begun to see capital recycling occur with a number of primary care assets being placed on market to fund development of larger precinct-style assets,” he stated.
ABOUT THE AUTHOR
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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