This article provides a broad overview of the healthcare sector, touching on the dynamics and trends shaping this vital industry. From there, it delves deeper into three specific areas of healthcare real estate—care homes, dental properties, and GP medical centres —that we find particularly compelling at this time. These sectors offer unique opportunities for investors due to their resilience, needs-based demand, and alignment with broader demographic and policy trends.
The facilities in which a healthcare service provider operate from are “mission-critical” to their business. A typical provider will establish themselves in a geographic market, building up a patient list within that area which is essential to their business. That provider is therefore tied to that specific location and will continue to rent the premises long-term (assuming those premises remain fit for purpose).
This exploration highlights why healthcare real estate remains a standout choice in today’s investment landscape.
Market Overview
Despite challenges during the last few years following the Covid 19 pandemic, the UK healthcare sector has shown operational resilience. This resilience is primarily due to the UK healthcare sector being underpinned by a growing and aging population. According to the latest Knight Frank 2024 Healthcare Report, the over-85 population, a significant driver of healthcare demand, is projected to double by 2045.
The aging population has heightened the importance of high-quality healthcare infrastructure, which is driving demand for purpose-built and well-maintained properties across the sector. Private capital is playing an increasingly vital role in meeting these infrastructure needs, offering investors a chance to align financial returns with societal impact.
Healthcare Real Estate Investment Performance
Healthcare real estate continues to deliver compelling risk-adjusted returns, driven by strong fundamentals and long-term income streams. The highly appealing feature of healthcare real estate as an investment is it’s lower volatility relative to other traditional sectors like office and retail. Unlike other sectors, which have experienced significant fluctuations due to sharp dips and recoveries, healthcare maintains a steady trajectory, staying closer to its long-term average.
This stability underpins its lower risk/return profile, making healthcare an attractive option for investors seeking consistent long-term performance. Conventional healthcare leases are characterised by long durations and index-linked rent reviews – meaning that rents are regularly adjusted in-line with inflation.
Sector focuses in Healthcare Real Estate
1. Dental Properties
The dental market remains a resilient and attractive investment area. The consolidation of dental practices by PE backed corporate groups continues to grow. However, in the last two years there has been a change in the dynamic of this consolidation. The largest groups have been out of the market, to take stock and trim non-performing assets. This has left the door open for smaller, but still well-funded, corporates to be acquisitive. From a real estate perspective this has meant that landlords have in general been able to negotiate more favourable lease terms due to the flexibility that the smaller groups can offer.
The requirement for dental services continues to grow, especially in the private sector where people’s desire to improve the aesthetics of their teeth drives this higher margin service. According to Christie & Co.’s recent Dental Market Review, this trend is further, fuelled by limitations in NHS capacity.
The following chart shows how corporate consolidators have shifted focus dramatically away from NHS and towards higher margin private dental services. Where the larger corporates used to dominate the mixed use and NHS space, this is now being filled by smaller corporates and individuals.
Currently much of the Dental property stock is located in either converted residential properties or high street retail locations. There is now some movement within the larger corporates to seek more modern premises in a more hub type approach. These would make for an interesting investment proposition, combining modern, well-located dental facilities, with high income producing businesses.
In summary, due to the growing demand for dental space, real estate requirements will only continue to grow in this sector.
2. GP Medical Centres
GP surgeries are at the heart of the UK’s primary care system, handling over 300 million patient consultations annually. The ageing population means that this reliance on a robust GP sector is only going to grow into the future. However, many facilities are outdated and in need of significant investment to meet modern standards and accommodate expanded services.
The NHS is pushing an integrated care model and is implementing funding initiatives to modernise primary care infrastructure. This combination, along with the government backed income that GP surgeries receive, creates a strong investment opportunity.
As healthcare evolves toward centralised hubs providing a broader range of services, these properties present a resilient and needs-driven option for investors seeking reliable returns in the healthcare real estate market.
A key feature of UK healthcare real estate is the way the NHS pays rent for GP premises. Through a reimbursement mechanism, NHS England covers the market rent for GP surgeries that meet its standards, either directly to property-owning GPs or to third-party landlords via lease agreements. This arrangement ensures stable, government-backed rental income, often with long-term, index-linked leases.
This NHS rent reimbursement mechanism makes GP medical centres an attractive asset class, offering investors a low-risk, steady cash flow tied to essential healthcare infrastructure.
3. Care Homes
The UK care home market is experiencing robust demand driven by the aging population and a shortage of high-quality care beds. As shown in the following heat map, the UK’s population is ageing significantly in the next 20 years, and therefore a combination of sustaining quality current stock and new build is required to combat this increasing issue.
There is a clear need for more care home beds. This can come from new care home developments, particularly those that cater to complex care needs, and also repositioning older homes so that they can deliver a modern standard of care.
Despite the increasing demand from an aging population, there has been a sustained period of time without any meaningful net new supply of beds. This has been due to a combination of challenging planning processes for new builds, as well as older, not fit for purpose homes being deregistered. It is therefore important that the current stock be maintained so it remains fit for purpose and continues to sustain the sector.
Due to demand and supply imbalances, well-run care homes benefit from high levels of occupancy and long-term rental income. The rental income stream is supported by predictable occupancy rates and strong demand fundamentals. These factors combine to make care home real estate an attractive investment for income driven investors.
A Forward-Looking Perspective
With demographic and policy tailwinds, the healthcare sector is well-positioned for growth. However, there is the need for investors to prioritise high-quality, well-located assets managed by reputable operators. By focusing on sectors such as dental practices, GP surgeries, and care homes, investors can capitalise on the growing demand for modern healthcare facilities while contributing to the sector’s development.
Healthcare real estate should no longer just be an alternative asset class—it should be a core strategy for those seeking stability, resilience, and impact in their investment portfolios.
Investing with SIRE Capital Partners
Working with a specialist healthcare investment manager will ensure your objectives are well understood. In the current market it is important to work with specialists that can produce results based on the most up to date, informed and educated views.
Small incremental changes to terms can lead to larger variations in expenses and outcomes. We manage our clients risk exposures across the entire investment process. This covers all aspects of transaction management from deal origination, detailed underwriting, post due diligence checks, and ongoing asset and property management.
Patrick Ryan is a Principal and Co-founder at SIRE Capital Partners, working on Deal Origination and Asset Management.
Patrick has spent 20 years in the property sector in London.
His first foray into the sector was in 2003 when he co-founded a mezzanine finance business that focused on lending to property developers in and around London. Following this he headed up SIRE Properties, a healthcare focused asset management firm. Patrick has now co-founded SIRE Capital Partners that has expanded on his healthcare asset management focus to take in broader services to include brokerage and capital advisory.
