Interest in healthcare-related real estate surges during COVID-19

Demand for healthcare property has soared to new heights during the coronavirus pandemic, amid strong interest from investors.

Investors have snapped up a number of healthcare and medical centres recently, attracted to a sector providing an essential service during the pandemic and the security of long leases.

REA Group chief economist Nerida Conisbee said the sector was in hot demand.

“We are seeing very high enquiry levels for healthcare-related real estate,” Ms Conisbee said.

Ms Conisbee expected medical-related property, such as hospitals and medical centres, would continue to attract strong interest from investors.

“We know that government is going to be so focused on healthcare for the foreseeable future,” she said.

Ms Conisbee said the pandemic has also accelerated interest in life sciences property, connected with the pharmaceutical, biotech and medical technology industries.

“It’s seen as a huge growth area,” she said.

“There’s going to be a lot of government investment and focus on it. There are a lot of people who are very interested in it from an investment perspective.”

CBRE’s Jimmy Tat said recent transactions underlined the strengthening interest in healthcare as an asset class.

“Demand for both healthcare property and businesses has been strong for a number of years, however appetite levels have climbed to new heights in 2020, with investors appreciating the essential service nature of the operation,” Mr Tat said.

“We are seeing more investors gravitate towards healthcare as an asset class due to its relative security given our ageing population and the increasing demand for medical service nationally.”

Mr Tat said there was strong interest in a medical precinct in the Melbourne suburb of Wantirna, which a Hong Kong-based investor bought for $5 million after an expressions of interest campaign.

A Hong Kong investor paid $5 million for a Melbourne medical precinct. Picture: CBRE

CBRE’s Marcello Caspani-Muto said there was widespread buyer interest in healthcare real estate, including from owner occupiers and developers of suburban super clinics.

“There has been a notable increase in investment interest in the asset class from both high-net-worth privates, syndicates and institutional buyers, who previously have not considered playing in the space,” Mr Caspani-Muto said.

CBRE recently sold a medical clinic in the outer Melbourne suburb of Berwick for $5.05 million. A second medical centre in Melbourne’s Glen Waverley sold for $1.296 million.

The Glen Waverley clinic was one of a pair of medical centre investments sold recently. Picture: CBRE

Savills also reported intense buyer interest in the “in demand” health sector, after the off-market sale of the new Ochre Health Hub on the Sunshine Coast to a private Sydney-based investor for $15.3 million on a 15-year lease back.

“The medical and allied health sector continues to be a highly-coveted asset class, which has been accelerated by increased demand for long-leased real estate tenanted by essential services,” Savills’ Peter Tyson said.

Knight Frank sold a medical facility in inner Brisbane suburb of Newmarket to a local private investor for $11.4 million in an off-market deal, and is now leasing the sixth and final tenancy.

“The purchaser was attracted to the health-related nature of the asset, particularly during a global pandemic, in which the health sector has remained strong and resilient,” Knight Frank’s Blake Goddard said.

Owner occupiers have also been seeking healthcare assets. Life Fertility Clinic paid $7.6 million for a two-level office building in Brisbane’s Bowen Hills and will relocate there from St Andrew’s Hospital in Spring Hill.

Life Fertility Clinic paid $7.6 million for this Bowen Hills office building. Picture: realcommercial.com.au/sale

JLL’s Tim Jones said there was strong interest from a range of owner-occupier groups when the property was first listed earlier in the year, before the sale campaign was suspended during COVID-19 restrictions.

“Since businesses have been able to transition back to work we have seen buyer confidence return and this, coupled with the current low interest rate environment, has seen strong demand for quality owner-occupier opportunities,” Mr Jones said.