Managing healthcare fundamentals and future performance

Over the past decade, the European healthcare sector has become increasingly popular among institutional investors’ portfolio allocations given its rational, property fundamentals and social impacts in line with the United Nations Sustainable Development Goals. 

The sector has accounted for 3% of total investment volumes on average in Europe since 2016 compared to less than 1% since 2007. Being more defensive than other cyclical commercial sectors, the healthcare sector has been a meaningful diversifier in property portfolios. With traditional indexed long-term leases and large occupation rates, the sector has gained traction over the past few years, pressuring yields to historic lows. However, healthcare is seen at a crossroad with some operators’ business models being more vulnerable to increasing service charges and structural changes related to ageing itself: as a result, some schemes have experienced a strong value fall while others have been more resilient. Investors’ strong track record, social commitments with a high ability to provide adequate supply will continue to deliver sustainable income streams over time.

Swiss Life Asset Managers has been active in healthcare real estate since 2006. Our investment strategy has been primarily focused on nursing homes, medical office buildings, after care and new submarkets such as rehabilitation- and psychiatric clinics to diversify our portfolio. Over time, senior housing has been included in our investment strategy given a rising need to support well-being of seniors as part of the spectrum of the healthcare sector.

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