The care market is considered a growth market. The demographic change in the western industrialized countries alone ensures this. Even in Germany, this megatrend is irreversible and with an aging society – despite the medical progress – the number of people in need of care is increasing. While around 2.9 million people were in need of care in 2017, by 2030 this figure is likely to increase by around 20 percent to over 3.5 million. However, demand already exceeds the supply of (partially) stationary care places. Waiting lists for the accommodation of dependent parents or elderly relatives are no longer a rarity in view of the busy nursing care facilities.
Assuming a constant care and home quota for the near future, the construction of a good 320,000 new care places is mandatory by 2030. In addition, a large number of existing nursing homes have gotten old and accordingly have a high maintenance backlog. The required new and reinvestment amounts to around € 70 billion, according to the ZIA’s position paper published last autumn. In addition, there is a lack of adequate alternative forms of housing for those in need of care, above all barrier-free housing in accordance with DIN 18040-2, in order to do justice to the required closer integration of outpatient and inpatient services for the benefit of those in need of care.
Unfortunately, this aspect is completely ignored in the current public debate around the bill with the cumbersome name “Nursing Staff Strengthening Act” similar to the “Concerted Action Nursing” in the coalition agreement. More staff, better education and better pay as well as the social upgrading of the nursing profession are just as necessary as a reliable and sustainable framework for investment in nursing homes.
We cannot do it without private investors
To avoid the imminent under-supply of adequate forms of care and to avert the ever-increasing care needs is a macroeconomic important task, which will not be able to cope without adequate private investment at adequate returns. Even today, 42 percent of the approximately 11,500 SGB XI-approved inpatient nursing homes are operated by private providers – and the trend is still rising in face of a highly fragmented market. And investment in nursing homes is also dominated by listed real estate companies and institutional investors pursuing a long-term investment strategy. Between 2013 and 2017, more than € 6.3 billion was already invested in nursing care homes and retirement homes throughout Germany. For 2018, we expect a transaction volume of up to € 1.5 billion, especially since over € 900 million have been registered in this asset class so far. It should be noted that there are increasing numbers of health care REITs and investment funds specializing in this asset class in the local market.
Reducing regulatory barriers to investment requires that the urgently needed investments for new and creative forms of care and living that meet the needs of the growing number of people in need of care be made available on the market. Strict standards for the single room rate or the minimum size for nursing rooms, which are not uniformly regulated in the sixteen federal states, are certainly not effective in meeting this great challenge. In addition, in view of further increasing construction and land costs, a marketable indexation of the investment costs must be ensured. Long-term oriented investors need planning security, not a restrictive planned economy.
Source: Cushman & Wakefield Research, 2018
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By Dr. Jan Linsin, Head of Research Northern Cluster at Cushman & Wakefield
Dr. Jan Linsin has been Head of Research Northern Cluster at Cushman & Wakefield since April 2018. In this new position, he is responsible for the research domains of the countries Germany, Sweden, the Netherlands, Belgium and Luxemburg.
Prior to his move to Cushman & Wakefield, the economist, who holds a doctorate, was Head of Research Germany at CBRE from 2008 onwards. His main specialty was the planned and strategic orientation towards real estate market research and real estate related investment research. Prior to 2008, Dr. Jan Linsin was Senior Market Analyst in the Department Research & Strategy of DEGI Deutsche Gesellschaft für Immobilienfonds mbH and Head of the Department of Economics and Real Estate Economics of the IVD Süd (German Real Estate Association South).
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