• Investment volume of €931 million, 63 percent less than in 2022
• Care homes and assisted living determine the market
• Care home prime yield up 0.8 percentage point to 5.2 percent in the last twelve months
• Keener investor demand observed for medical centers and medical care centers

Germany’s healthcare real estate investment market recorded a transaction volume of €931 million in 2023, reflecting a decline of 63 percent as against the previous year. Investment momentum therefore roughly equates to the level of 2017. The share of international investors came in at 17 percent, down 29 percentage points compared with 2022. These are the conclusions drawn in a current analysis prepared by the global commercial real estate services company CBRE.

The repricing process on the healthcare real estate market is likely now largely complete. 

Compared with year-end 2022, care home prime yield has risen 0.8 percentage points to 5.2 percent.

Care homes take center stage again

At €578 million, a major part of the transaction volume (62 percent) was attributable to care homes. Assisted living followed on in second place with €262 million (28 percent). All other segments were much less relevant: Rehab clinics and medical centers each captured a transaction volume of €39 million (4.2 percent) and clinics as little as €14 million (1.5 percent). “Even if not yet reflected in the investment volume, we are seeing huge interest in properties beyond the boundaries of inpatient care. Medical centers, for instance, have caught the interest of many investors who were formerly more active in other commercial real estate classes. Regulation by the policymakers and the associated operator risk is manageable for medical centers and medical care centers,” Schnell comments in explanation. “At the same time, more product in this segment, along with systemically relevant real estate such as rehab clinics and clinics, are likely to come on to the market in the future as we are also seeing consolidation on the operator market here. For instance, there are operator investors who opt for sale-and-leaseback for properties acquired together with the operators.”

Outlook for 2024

“Real estate for later living, health care centers and social infrastructure are at the top of the agenda for a large number of investors, particularly institutional investors, not least also because part of their ESG strategy can be implemented. We expect that interest from this group will be reflected in greater momentum on the investment markets as the year 2024 progresses. Private capital is required for the urgently needed social transformation in Germany, especially as there is not only a lack of affordable forms of living for an ageing society, but also of contemporary, efficient healthcare properties,” Schnell states.

“With the yield adjustment completed in the last twelve months, and against the backdrop of the ECB’s tighter monetary policy that is increasingly taking effect, with the result that the interest rate cycle may have peaked, market players have more planning reliability in their investment decisions. Accordingly, we expect yields to stabilize further, not least because financing interest rates were falling at the last count and alternative investment vehicles in the form of fixed-income securities are generating more moderate yields, which makes investing in property more attractive,” Linsin comments.