More than 200 people tuned in to watch April’s Between the Lines Live webinar today, where a panel of experts discussed what’s happening in the market for healthcare assets.
Ray White head of research Vanessa Rader hosted the panel, interviewing Ray White Commercial TradeCoast medical asset specialist Franz Stapelberg, and leading healthcare asset developer Rogerscorp director Simon Rogers.
The panel spoke about investment, development, and tenant demand in the healthcare sector, as well as where the sector has come from, its journey through the COVID-19 pandemic, and their expectations for this asset class in the years ahead.
With an ageing population and strong international migration, Mr Stapelberg said Australia was at the crux of an increase in demand for healthcare assets.
He said these assets could be divided into three categories – primary, secondary and tertiary healthcare.
“Medical centres are generally referred to as primary healthcare assets, whereas secondary are more specialised services like day hospitals and specialists, the next step after a GP has seen the patient ,” Mr Stapelberg said.
“Tertiary healthcare assets are generally things like cancer care and service that are even more specialised.”
Mr Rogers said there had been a change in the way these assets were coming to the market.
“We’re working on two projects at the moment which include the whole healthcare ecosystem in one building, the GP, specialists, and day hospitals for procedures where you can have a full integrated experience,” he said.
“It makes it more convenient for the public and helps tenants get referrals from each other.”
With the Australian healthcare system struggling to keep up with demand, particularly for elective surgeries, Mr Stapelberg said healthcare assets were attracting interest from REITs and international buyers,
“Some of these assets have traded with yields as low as 4 per cent, but recently they’ve moved up to 5-6 per cent – it depends on the tenant covenant and the size of the asset,” he said.
“The larger it gets the more interest there is from those international funds, but we still have assets in the sub $10 million range attracting smaller private investors.
“They’ve seen medical assets as a good investment over the long term and not just the short term.”
Mr Rogers said there were some barriers to the development of healthcare assets, including a series of requirements not needed for other commercial buildings.
“Over the last 18 months there’s been a rise in construction costs, and there’s been a softening of yields, which squeezes developers at both ends, but having strong tenants in a resilient asset class lays some strong foundations for healthcare developments,” he said.
“Zoning does get a bit tricky with hospitals.There’s been a rise in people going through the State Government for applications instead of local council to get the DA across the line which is common in the hospital space.
“In the inner-city zone there is a maximum amount of car parks you can have, and patients are often sick and don’t want to rely on public transport, so trying to get things like that past council is hard.
“Turning an office building into a healthcare asset does have its challenges.
“Primary healthcare uses can fall under a traditional office building, but as soon as there’s more procedures happening onsite and non-ambulant patients you need those extra requirements.”
