Urbis Think Tank
Medical and Health sector property market continues to be strong
During 2011, Urbis has noticed significant momentum in the market for medical and health properties, both from developers and medical operators. The Health Care and Social Assistance industry is set to be the fastest growing sector for job creation over the next 5 years, and in conjunction with our ageing population, this is driving a demand for medical facilities.
In addition to the demographic factors, a number of other issues are assisting this growth for private medical properties:
- The private sector has benefited from increases in wealth, an expansion of private medical insurance, concern about the adequacy of services and waiting times at public hospitals and a growing awareness in the community of health-related issues.
- There is growing pressure from the health insurers to improve efficiencies by co-locating private hospitals alongside major public hospitals in order to allow specialist services such as pathology and radiology to be shared.
- There has been strong growth in day procedures which allows the costs of the time spent on patient care to be reduced. This is a global phenomenon that reflects advances in medical technology and the associated costs of treatment. There is enormous pressure to manage costs by reducing the amount of time patients stay in hospital
Many of the medical property developments that are emerging around Australia are large in scale, such as the $2.03bn Sunshine Coast University Hospital funded by the Queensland government. However, Urbis has also noted an increase in private investors in the sub $1.5 million price band, who are taking an active interest in medical centres. Medical centres, whilst somewhat unique as a property investment class, provide a perceived level of security due to their non-discretionary client base which is not impacted to the same extent as retail and commercial assets during times of economic uncertainty.
While these properties vary markedly, recent transaction of suburban medical centres in Melbourne and Sydney have sold with leases in place at an equated yield of 6.2% to 8.4%.
Urbis is assisting a number of clients with transactions and developments in the health sector. We expect that the number of transactions will continue to be strong, and development of co-located facilities will also increase