From the insightful discussion during our recent care webinar, it’s evident that the sector is currently facing various challenges and opportunities. During the session, Marc Simo, Associate Director of Debt Finance at OakNorth, his colleague Mike Tierney, Director of Debt Finance and Prabh Sohi, Healthcare Valuer at CBRE, discussed the critical aspects shaping the industry and provided valuable insights for care home businesses to set themselves up for success. Here’s a recap of what they covered…
What happened in the industry last year?
In 2023, the care home sector experienced a range of challenges such as rising interest rates, inflationary pressures, and staff shortages. Because of these factors, Mike and Prabh noted that they experienced a somewhat subdued level of transaction activity compared to previous years. A quick pulse check of the audience – which was made up of care home operators, investors, owners, developers, and other key business influencers – confirmed this, with over half (52%) saying that their business saw less activity throughout 2023.
But despite these challenges, they discussed how the care home market has demonstrated remarkable resilience. Occupancy rates approached pre-pandemic levels, indicating sustained demand for care home services. Moreover, average weekly fees increased by approximately 10% across all care home types, reflecting the industry’s ability to adjust to changing economic conditions.
What’s the industry’s outlook for 2024?
As the industry looks ahead to 2024 and beyond, there was a consensus among participants that increasing the number of beds and rooms is a priority for many care home operators. With 79% of respondents planning for expansion or new acquisitions, there is a strong indication of optimism and growth potential in the sector.
The fact is, with 56% of all care homes in the UK over 20 years old*, there is a serious need to bring older homes up to contemporary standards so that they are fit for residents use and comply with evolving regulatory requirements. This, coupled with the ageing population, presents a significant opportunity for investors and operators of older homes as they can re-purpose the existing homes as well as develop new homes in the knowledge that the demand will likely outstrip the supply.
At OakNorth, we’re positioned to help our customers take advantage of opportunities as they arise, no matter the season. In the first two months of this year alone, we’ve lent over £200m to UK businesses across the board and continue to have a strong appetite to lend to the care sector.
Overall, the webinar provided valuable insights into the current state of the care home sector and showcased what’s on the horizon for 2024. With careful planning, strategic investments, and a focus on quality care, the sector is poised for continued growth and innovation in the coming years.
Thank you again to Prabh Sohi, CBRE and Mike Tierney, OakNorth for joining us and sharing your insights into the care home sector. You can reach out to Prabh via [email protected] and Mike via [email protected], or learn more about how we’re funding the future of care here.
If you’d like to watch the full discussion, you’ll find the webinar recording here.
* Knight Frank UK Care Home Trading performance review 2023.
