Each month I get up close with key stakeholders in social care. This month I meet Rob Kinsman, Regional Director at Christie & Co
How did your career lead you to become a specialist in the social care sector at Christie & Co?
I qualified as a Chartered Surveyor over 25 years ago. My initial training was in operational real estate focusing on the sale and valuation of hospitality businesses in the West Country and, in 2003, I joined the Healthcare team at Christie & Co. It’s great to be part of such a dedicated and experienced group of professionals which regularly sells over 60% of the individually transacted care homes in the market.
Do you enjoy working and providing insight into this market?
The social care sector is hugely vital yet remains chronically underfunded. This provides unique challenges to both operators and advisors, and makes it a fascinating market to work in. I have worked alongside government bodies, large corporates, non-profits, banks, administrators, and private owners. The breadth and variety of work keeps us on our toes!
What are your biggest challenges operating in the social care market?
The social care market varies massively from region to region, with big differences in local authority fees, bed space supply & demand, demographics, and labour supply. These, and many other factors, impact the value and demand of care homes, so an in-depth understanding the local market is of paramount importance when advising owners and funders.
Covid has undoubtedly changed the landscape of social care. What are the challenges and opportunities for care providers?
The immediate challenge is staffing shortages, which is has become more acute than ever before.
Another challenge for many providers is the number of bed vacancies and the subsequent pressures on cash flow. Occupancy, for many, is yet to fully recover and, whilst there are various levels of central support for operators, the occupancy and referral landscapes remain patchy.
The social care market continues to be fragmented and, what one provider may see as an opportunity, the other may not. However, there is not one single model that works, and there remain exciting opportunities for those providers that understand what model of care is needed in their locality.
How as the pandemic impacted property transactions in the sector?
The first wave of COVID-19 last April and May saw many transactions put on pause but, since the market opened up in June 2020, we have seen a steady increase in activity as M&A activity resumes. Due to pent up demand, deal volumes across all our sectors are up 11% on 2019 and healthcare transaction volumes are up 6%.
Underlying activity has not been this strong since 2007, with offers on our clients’ care homes up 16% on 2019 and the number of deals we have put into solicitors’ hands up 35%. With such strong appetite in the sector, demand continues to outstrip supply.
Encouragingly we have seen further yield compression in the investment market, with sub 4% yields for super prime stock.
What can be done to increase the growth rate of care home beds?
There are areas of the UK that have seen huge growth in purpose-built bed provision, but the net gain in bed numbers can often be lower due to closure of older, dated homes.
One of the key obstacles for new homes is the soaring build costs and return on investment for investors. Construction costs have more than doubled in the past five years, but the rate of fee income has not kept pace with inflation. Development has therefore focussed on areas which can provide a decent level of private pay income and those less affluent areas have seen very little growth in new-bed supply.
Until the fundamental business case for building in these areas stacks up, we are unlikely to see much growth of new-builds in these locations. We need to see an overhaul of funding in the sector to ensure cash-strapped local authorities pay a rate that encourages greater investment in new-builds.
Do you think that there will be more investment activity following the Government’s recent announcement on plans for social care?
The underlying drivers of the market – the ageing UK population and attractive real estate market -remain relatively unaffected by the Government’s recent announcement.
We have seen no material shift in investor appetite following the announcement and expect increasing interest from both UK based and foreign investors. Korian’s acquisition of Berkley Care earlier this year was a good example of how attractive the UK market is to foreign investors.
Recruitment and retention issues have long been a problem for the sector and have been further compounded by Brexit and COVID. How can the sector recover from this?
Staff shortages have been an issue in the social care market for years, but the pandemic and Brexit have compounded this, and, in September 2021, there were well excess of 100,000 vacancies in social care. The sector is likely to lose another 10% of its workforce due to the Government’s all staff vaccination policy. With these shortages, there is a real worry that the delivery of care will suffer, and providers will increasing be unable to fill their rotas.
There is no easy fix for this but, as a start, wages need to increase to compete with other sectors and reflect the contribution and importance of their role in looking after societies most vulnerable. The Government also needs to widen the criteria of the Shortage Occupation List to include care staff and not just senior carers.
Finally, if you could grant one wish for social care, what would this be?
The pandemic shone a spotlight on the brilliant work of the sector and its workforce, but I believe there is still a way to go. I’d like to see a greater understanding from the Government of the social care sector and its need for an integrated NHS and social care system which includes one overarching budget, as this is fundamental for meaningful progress. Another White Paper is to be published later this year which will include the proposal for a long-overdue reform of the system.