HEALTHCARE
A restart for new investments
The potential of healthcare real estate investments has been underutilized in the past year. The challenge of meeting current and future healthcare demands is growing significantly. Aging populations, outdated healthcare facilities, staff shortages, and inefficiencies in care delivery are creating a pressing need for appropriate real estate solutions. Political and social pressures to improve the healthcare landscape are mounting, and investors are eager to increase the share of healthcare real estate in their portfolios. However, not all indicators have been green over the past few years.
Several factors explain the lagging investment volume. Sharp rises in interest rates and economic uncertainties have led to general investor caution, especially as real estate already represents a substantial share of many investment portfolios. Additionally, investment conditions have been challenging in recent years due to high construction costs. Policy-related obstacles often hinder swift progress, and while the willingness is there, political and administrative processes are slow, especially in the healthcare sector.
Nonetheless, we are optimistic about 2025 and beyond. Healthcare real estate is more firmly on the political agenda than ever, and there is increasing attention to realizing new healthcare facilities. Demand and supply prices are moving toward equilibrium, while investor interest in sustainable and impactful real estate continues to grow. In this Outlook, we share our vision on the key trends and developments that will shape the future investment climate for healthcare real estate. We delve into the supportive and preventive role that healthcare real estate can play in addressing societal challenges posed by increasing healthcare demands. And, of course, we present our view on why investing in this sector is compelling for investors.
Klaasje Zevenster, Amstelveen
Real estate solutions for labor market challenges
One of the most pressing issues in healthcare is the labor market shortage. In 2024, nearly 50,000 vacancies were open in the Healthcare and Welfare sector (see Figure 1). Over the past four years, the number of vacancies in healthcare has doubled. The majority of these vacancies are in the nursing, care, and home care (VVT) sectors, particularly for (specialized) nurses and caregivers. These shortages are evident in every region of the Netherlands. In some local cases, the shortage is so severe that healthcare institutions must keep departments within their real estate closed. This is a distressing reality given the existing waiting lists for residential care.
At the same time, this situation creates a financial risk for healthcare institutions, as certain costs, such as housing expenses, continue while reimbursement remains insufficient. Projections for the required number of healthcare workers, alongside anticipated staffing levels, point to even larger shortages in the future—up to 250,000 healthcare workers over the next decade (see Figure 2).
FIGURE 1: Open vacancies by field of expertise
Source: UWV | Werk.nl (2024), edited by Achmea Real Estate
FIGURE 2: Supply and demand of healthcare workers
Source: Prognosemodel Zorg en Welzijn (2024), edited by Achmea Real Estate
While healthcare real estate does not directly attract more people to healthcare education or alter the organization of healthcare processes, it can contribute indirectly to creating a more appealing work environment and enhancing workflow efficiency. This is precisely why it’s essential to continue developing and optimizing healthcare real estate.
Increased efficiency. Clustered, life-cycle housing can help streamline care delivery, as it allows multiple care-dependent individuals to live in close proximity, facilitating logistics. For healthcare staff, this means less time pressure, shorter travel distances, and potentially reduced workloads, as different forms of care can be combined more easily.
Prevention over cure. Prevention plays a crucial role in reducing long-term care demands. Through the use of clustered, life-cycle housing, care-dependent individuals can live independently for longer, preventing loneliness and the need for intensive, prolonged care. This greatly relieves pressure on healthcare staff by allowing early intervention, accessible housing solutions, and family caregiving to reduce the need for intensive care at a later stage.
Enhanced technological capabilities. Technological innovations within modern healthcare real estate can support professionals by alleviating their workload. Modern facilities offer greater flexibility for integrating technology that improves the efficiency of healthcare workers. This is especially true for modifications such as custom bathrooms and integrated tools that streamline care processes.
Improved job satisfaction. Attractive work environments within modern healthcare real estate can enhance job satisfaction and the autonomy of healthcare workers. New constructions focused on improving the workplace can help make healthcare careers more appealing, aiding in both recruitment and retention of staff.
Campagne, Maastricht
Mismatch in (care-appropriate) housing
There is not only a shortage in the labor market but also a significant demand-supply gap in the housing market. It is no surprise that housing needs have long been a priority on the Dutch agenda. By 2040, an estimated 1 million additional homes will be required compared to 2023 (source: ABF Research). While the quantitative demand is often highlighted, the qualitative aspects of housing needs receive less attention. It’s not just about the balance between ownership and rental or affordability categories like affordable, mid-range, or high-end; it’s particularly about housing types. This is especially relevant for the needs of seniors with either emerging or advanced care requirements.
Although policies promoting independent living align with the preferences of many care-dependent individuals, there inevitably comes a point when care needs become too intensive for home-based support. At that stage, a transition to a residential or assisted living arrangement with 24-hour care becomes necessary. In sparsely populated areas, like Zeeland, issues can arise even with basic care needs. Home care is often no longer guaranteed in these regions, forcing care-dependent individuals to relocate to designated care neighbourhoods or suitable assisted living facilities assigned by healthcare providers. However, the challenge is that there is frequently an insufficient supply of care-appropriate housing for individuals with specific care needs, such as care levels ZZP3 and ZZP4.
This reality, along with expectations that similar situations will become more common across the country, underscores the urgent need for more care-appropriate and life-cycle-resilient housing.
Of the 1 million additional homes required by 2040, approximately 450,000 must be suitable for seniors or individuals with care needs. This includes step-free homes, adapted elderly housing, and clustered living options. Around 170,000 of these homes should be available as rentals, nearly 100,000 of which in the mid- to high-rent segments specifically designed for those needing care (source: ABF Research).
The scale of housing and care housing needs is almost unimaginably large. With all the good intentions within the sector to create the ideal care-appropriate housing concepts, we risk "over-delivering." The accumulation of requirements and expectations often becomes so high that both costs and feasibility are under pressure. It’s worth considering whether simplification is possible, particularly in the affordable segment. By easing some of the demands and requirements, we can still provide housing that is significantly better suited for care than much of the existing stock.
This challenge is not only substantial but also of great importance. It presents institutional investors with a unique opportunity to make solid long-term investments while contributing meaningfully to the care provision for the elderly.
24-hour care becoming more intensive and large-scale
While the focus for milder care needs is primarily on care-appropriate home settings, the intramural domain is increasingly reserved for the highest levels of care requirements. This places high demands on healthcare institutions, both in terms of care provision and the financing thereof. Additionally, it has significant implications for housing requirements. We anticipate that more large-scale facilities will be necessary to operate cost-effectively (see example ‘De Slinge in Assen’). Policy limits the growth of the intramural segment to a few thousand additional spots, with a maximum of 135,000 nursing home placements. However, much of the existing stock is technically outdated and not "Paris-proof." The major challenge for the coming decade is to make this aging intramural care real estate future-proof in terms of both energy efficiency and functionality.
Unfortunately, the demand for housing that can accommodate intensive care needs far exceeds the policy limit of 135,000 nursing home placements. By 2040, the need for intramural spaces will grow by more than 100,000 additional spots (see Figure 3). Furthermore, there will still be a substantial group of 60,000 to 70,000 people by 2040 with a VPT/MPT (fully integrated home care/ modular home care package) indication who will also require care-appropriate housing. Therefore, it is likely that the total need for nursing home placements is at least double the current availability of intramural care spots.
FIGURE 3: Development of total intramural demand (ZIN + Intramural VPT/MPT)
Source: ABF Research (Fortuna 2023), edited by Achmea Real Estate
Renovation and scaling up in Assen: The De Slinge case
In Assen, the intramural care facility De Slinge is currently under development, comprising 176 care units and various amenities such as a restaurant, physiotherapy services, and spacious communal areas. This project involves the demolition and reconstruction of an existing building, integrating another location of the tenant, Interzorg. This integration enables Interzorg to optimize its care services and upgrade the residences to meet current standards and requirements essential for delivering quality care.
De Slinge is leased by Interzorg from Achmea Real Estate.
De Slinge, Assen
A lower risk premium for healthcare real estate
Healthcare real estate has been on the radar of many institutional investors for several years now, driven by its vast market potential. This asset class has outgrown its niche status, which is unsurprising given its attractive investment characteristics. Risk perception is reflected in the gross initial yield: since tracking began in 2016, yields in healthcare real estate have declined more sharply than those in other asset classes, such as residential properties (see Figure 4). This trend indicates that perceived risks for healthcare real estate have gradually lessened in the eyes of investors since 2016. Over the past four years, the decline has stabilized, with a relatively constant spread of around 1.0% in the initial yield (see Figure 5).
It is a valid question whether the current level of the risk premium in healthcare real estate is sustainable or only temporary. Strong arguments suggest that the risk premium could decrease further in the coming years. Healthcare real estate benefits from long-term lease contracts, providing stability and certainty in rental income. This keeps vacancy rates very low, and operational risks are limited, partly due to support from care offices and the Dutch Healthcare Authority (NZa). Additionally, the healthcare sector is largely immune to market volatility and economic fluctuations. Given this stability and security, combined with its favorable risk profile, a risk premium lower than the current 1% could theoretically be justified.
This presents a positive investment outlook for healthcare real estate, making it more attractive compared to other asset classes. Moreover, a lower risk premium enhances the feasibility of new projects by supporting higher prices. While this may result in a lower running yield, it aligns well with the low-risk nature of healthcare real estate. However, it will impact the long-term returns on these investments. At the same time, the value of existing healthcare real estate investments will increase.
FIGURE 4: Yield change in Prime initial yields
Source: Cushman & Wakefield (2024), edited by Achmea Real Estate
FIGURE 5: Spread of gross initial yield: healthcare real estate vs. residential
Source: Cushman & Wakefield (2024), edited by Achmea Real Estate
Zorgpark Scharn, Maastricht
General practitioners as essential link
Healthcare real estate encompasses more than just various types of care housing; it is closely connected to primary care and supports the goal of extended independent living. Strengthening primary care is essential to keeping healthcare affordable and accessible, as emphasized in the Integrated Care Agreement. The healthcare sector faces mounting pressures from an aging population, shrinking social networks, and staff shortages, leading to rising healthcare costs and an increasing demand
for care facilities. Healthcare real estate plays a crucial role by providing suitable facilities for curative care, bringing healthcare closer to home and promoting independent living.
General practitioners serve as key players in primary care, acting as gatekeepers to prevent unnecessary referrals to more costly secondary care. However, a major bottleneck is the shortage of general practitioners, which hinders the necessary development of extramural care housing for individuals receiving VPT-funded care. For residents, the ability to register with or receive care from a GP is essential, yet this is currently not always feasible.
To keep healthcare accessible and affordable, a more efficient organization of the healthcare system is essential, with health centers playing a critical role. Innovation, digitalization, and e-health offer significant opportunities to improve both the quality and efficiency of care (see example ‘Stadspoli Maastricht’). However, the recent bankruptcy of the commercial GP chain Co-Med highlights that implementing such initiatives requires substantial improvement. Investors can play a vital role in the development of modern health centers by investing and applying their expertise to manage and integrate them with residential, care, and commercial facilities.
Stadspoli in Maastricht as an example for improving healthcare infrastructure
The two Stadspolis in Maastricht are excellent examples of providing the right care at the right place. They function as "1.5-line" health centers, offering an intermediate level of care between hospital services and primary care. In this model, the general practitioner remains the main caregiver for the patient. At the Stadspoli, a medical specialist from the hospital provides consultations or clinics based on GP referrals, after which the specialist advises the GP on next steps. For the patient, this means accessible, low-threshold care, as a hospital visit is often no longer necessary. In most cases, the patient does not need to be referred to secondary care, reducing healthcare costs and easing the burden on hospitals.
The Stadspoli initiative is a collaboration between Zorg In Ontwikkeling (ZIO) and Maastricht UMC+, with ZIO leasing the Stadspolis from Achmea Real Estate.
Investment perspective
Healthcare real estate is an attractive investment option for institutional investors due to its low risk, stable returns, and positive outlook. It also offers opportunities to achieve impact goals, particularly through its focus on sustainability and the social impact associated with an aging population. Rental income is typically stable and largely insulated from economic fluctuations, while vacancy risk remains relatively low. Government policies supporting independent living and the decentralization of primary care contribute to this stability. Additionally, healthcare real estate is less susceptible to value fluctuations than residential properties, providing more consistent value growth and better diversification within a real estate portfolio.
Makroon, Amsterdam
Combining different types of healthcare real estate
For investors, combining various healthcare segments within an investment portfolio can be highly attractive, providing additional risk diversification, more stable returns, and increased impact.
Life-cycle-resilient housing, for example, has return characteristics similar to standard residential properties, with value growth as a primary driver. This can lead to high returns during rising housing markets but also carries risks such as value declines, higher turnover rates, and policy changes. Intramural and private healthcare properties, where operators are the primary tenants, exhibit much more stable value growth. With no role for property liquidation, the focus is mainly on operations, offering a higher direct return than regular residential properties. Curative healthcare real estate, such as health centers and clinics, yields significantly higher direct returns, though with increased operational costs and risks. However, with careful asset selection, these properties can achieve highly attractive long-term returns, positively impacting the overall investment portfolio.
Combining various healthcare segments enhances the integration and quality of care. It benefits individuals to remain in life-cycle-resilient homes as long as possible, with the option to access nearby healthcare facilities as their needs increase. This applies to both primary and long-term care, expanding the potential impact for investors on the healthcare sector.
Achmea Real Estate believes that a mix of different healthcare property types, with varied return characteristics, provides a valuable long-term addition to an institutional investment portfolio.
Healthcare real estate: a liquid asset class
A key argument for institutional investors to consider healthcare real estate is its relative liquidity as a property segment. In our ‘Investment Market Outlook’, we delve into the new Future Pensions Act and its implications for real estate investments. One of the main impacts is that liquidity becomes a significant advantage. Properties with high marketability in terms of function, price, and risk profile can be sold more quickly than less marketable assets.
Healthcare real estate is considered relatively liquid due to stable demand, driven by aging populations and the ongoing need for healthcare facilities. Long-term leases with reliable tenants provide predictable income streams, making this segment attractive to investors. Additionally, healthcare real estate aligns well with ESG objectives, increasing institutional investor interest. Less vulnerable to economic fluctuations, healthcare real estate maintains better marketability across varying market conditions. The growing interest from investors further enhances market activity and, consequently, the liquidity of this segment.
Dagelijks Leven, Schoonhoven
De Flair, Gilze
Timing and availability
Many of the conditions needed to accelerate investments in healthcare real estate are already in place. There is clear demand from both users and investors, and there is both societal and political will to invest in healthcare real estate. However, supply lags behind, particularly due to limited new construction—a well-known bottleneck. This restricts the available supply for institutional investors, especially in the residential segment and specifically for intramural healthcare real estate. Due to capacity expansion restrictions, most opportunities lie in sustainability upgrades and redevelopment, although these are often lengthy and complex processes.
In private assisted living locations and life-cycle-resilient housing, there are better opportunities for quick new-build investments. Additionally, these segments offer opportunities to acquire existing healthcare properties. In the short term, these segments therefore present the best investment opportunities. For curative healthcare real estate, such as health centers and clinics, the main opportunities lie in acquiring existing facilities.
Pricing and location
In 2022, the long-standing decline in initial yields came to an end, followed by a rapid increase of over 100 basis points. In our ‘Investment Market Outlook’, we discuss market expectations. By mid-2024, healthcare real estate yields have stabilized, and for the most promising properties, there is renewed optimism. In the section on healthcare real estate risk premiums, we note that tight yields are logical for both intramural and private assisted living properties, as well as for sustainable and life-cycle-resilient homes in the highly affordable segment.
The stronger the care component of the property, the less relevant geographical location becomes for valuation and pricing. In our view, the distinction between opportunity map regions has diminished compared to previous years. Up to opportunity map region 6, we see sufficient potential based on market demand. In regions 5 and 6, however, it is especially important to pay close attention to local market conditions. For free-market life-cycle-resilient housing, the focus should ideally be on municipalities in opportunity map regions 1 through 4.
FIGURE 6: Opportunity maps for life-cycle-resilient housing and intramural and private nursing homes
Source: Achmea Real Estate
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