Supply of UK care home beds fails to keep up with demand, says Knight Frank

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The UK healthcare sector has seen stifled supply growth in care home beds in the past year despite ever-increasing demand, with data from leading global property adviser Knight Frank revealing that UK care home supply has grown by only 6 per cent in the last decade, while the UK’s over 65 population has increased by 22 per cent over the same period.

Knight Frank’s annual UK Healthcare Development Opportunities 2021 research report shows that total care home beds across the UK grew by 0.1 per cent in the past year to 480,072 across 12,034 care homes. This is largely attributable to developers pausing operations to deal with the impacts of the pandemic.

The limited growth in new stock, far outstripped by the growth in the over 65 population, is coupled with concerns around the quality of existing units. Older care homes are often converted from other use and many fail to provide adequate facilities for elderly residents. Some 29 per cent of existing beds lack en-suite facilities, an essential component of care provision, and 21 per cent of UK homes are currently rated by the CQC as “requires improvement” or “inadequate”.

Furthermore, despite the partial abatement of the pandemic in 2021, the number of care home closures across the UK fell only very moderately in the 12 months to April 2021 versus the preceding financial year. Knight Frank expects to see an uptick in closures as the government concludes its year-long financial support package, which will result in a further shortage of beds.

However, Knight Frank’s report also highlights a number of positive indicators which point to a bounce-back in quality care provision post-pandemic. An increase in vaccination rates among existing residents has seen a rebound in occupancy in the second quarter of this year, following a decline from 89 per cent to 79 per cent in the 12 months to April 2021. This year has also seen the resumption of much of the construction activity which was paused or delayed as the pandemic took hold in 2020, leading to a healthy pipeline of new beds. 2021 has seen a return to near-pre-pandemic activity levels, with 35 new care homes (2,430 beds) delivered or due to be delivered by end of Q2, compared to 4,610 beds delivered in the whole of 2020. There are over 7,000 beds currently under construction and a further 10,000 in the planning or tender stage.

Julian Evans, Head of Healthcare at Knight Frank, says: “The pandemic has brought significant challenges for the provision of high-quality care home beds across the UK, and the sector needs substantial investment if it is to match the rising demand for care facilities. While the past year has seen a modest increase in the total number of beds, this rate of growth remains insufficient and we risk an imminent care bed crisis, especially given the projected surge in the UK’s over 65 population in the coming decade.

“It is vital that new homes are built and existing stock is upgraded to meet the standards required of care providers. Though development activity is showing signs of recovery, the industry is still grappling with the latent effects of the pandemic, and we expect these problems to persist into the next year. There are concerns over limited finance funding development in the sector owing to increasingly risk averse high street clearing banks being reluctant to take a development risk combined with increased cost of raw materials and labour. A full recovery will rest on the targeted use of granular data to map regional demographic trends and pinpoint opportunities for development.”

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