$200 billion will be invested into Healthcare Infrastructure over the next five years, according to our recent research into the global trends for healthcare infrastructure from institutional investors. The investment opportunity is driven by the current shortage of good quality housing to suit later life which is urgently needed to accommodate the growing numbers of retirees and elderly, as highlighted in the research.
The number of people in the world aged 60 and over is set to rise from 962 million in 2017 to 2.1 billion by 2050.* This growth is driving investor appetite for specialist, high quality accommodation and healthcare facilities, including retirement communities, care homes and doctors’ surgeries to meet the needs of retirees and the elderly.
The respondents to the report indicated that the UK is one of the most attractive regions for future inward investment into the sector. In spite of Brexit, more than seven in 10 of those investors surveyed which have yet to invest in the sector are still considering allocating funds to the UK, while 60% of those global institutional investors surveyed, invested in Healthcare Infrastructure, already focus investments in the UK.
Nearly half of respondents (46%) cite attractive risk-adjusted returns as a driver to invest with almost a fifth of respondents investing in the sector (19%) experiencing over-performance.
Almost two-fifths (39%) of those invested record between 10% to 15% returns over the past five years.
Two-thirds of respondents are attracted to the sector as an opportunity to diversify their portfolio and pursue an investment that has low correlation with broader financial markets
Barriers to investing
While there is strong interest from existing investors, there is still a significant pool of untapped capital. Institutions surveyed highlighted a number of barriers to investing in Healthcare Infrastructure that will need to be overcome to drive additional investment into the sector. Almost half (45%) point to a lack of healthcare sector-focused resources and skills within their own organisation as a barrier to invest. The second-biggest challenge, cited by 44% of respondents, is governmental and regulatory barriers. Increasing regulation and the changing role of public and private capital in infrastructure projects can create uncertainties for investors. The role of specialist advisors and sector experts is even more pronounced in this market landscape.
Current and future investment demand is strong
Globally, institutional investors already investing in Healthcare Infrastructure allocate 6.1% of their investment portfolio to the sector and are looking to increase this by more than half to 9.5% of their portfolio over the next five years. Asian investors were the most active with an average current allocation of 10.6% of their portfolio, rising to 12.1% over the next five years.
Returns look promising
Seven in ten (71%) of those respondents already investing in the sector say their Healthcare Infrastructure investments are either performing as expected (52%) or over-performing (19%). Almost four in ten (39%) investors report an annualized net IRR of between 10 – 15% over the past five years. Global respondents expect the strong returns to continue and anticipate an average return of 10%. Asian investors were the most bullish, expecting future returns to reach 13% on average.
Diversification and demographics drive demand
Diversification is the prime driver for investors. The search for attractive risk-adjusted returns has taken on new urgency. The bull market looks to be running out of steam and political uncertainty is now a global concern. Healthcare Infrastructure is attractive in this context as it is sheltered from macroeconomic factors. The supply demand imbalance for quality accommodation and facilities to cater to the ageing population is the second biggest driver for investors. More than half (56%) say demographics is the principal reason for investing in Healthcare Infrastructure.
Europe is the primary focus for inward investment
Of the regions surveyed, the UK will attract the most inward investment into Healthcare Infrastructure over the next five years, from those who are yet to invest. Six in ten of those global institutional investors surveyed invested in Healthcare Infrastructure already focus investments in the UK. Europe is the primary focus for inward investment into Healthcare Infrastructure. Nearly half of those invested (45%) prioritise investment in Germany and four in ten (39%) prioritise France.
The full research report can be read here: http://www.octopusgroup.com/healthcareinvestortrends
*World Population Prospects: the 2017 Revision
