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Following a subdued phase, investment activity in Germany's healthcare property sector is picking up, albeit modestly. Industry reports from CBRE and Cushman & Wakefield indicate heightened investor interest in certain property types, such as established nursing homes with steady operator histories and medium- to long-term leases. This trend is driven by more stable revenue expectations amid an otherwise volatile real estate market, where primary healthcare assets like medical centres and rehabilitation facilities currently receive more attention than new-build nursing homes.
CBRE's figures reflect an investment turnover of around €50 million in the healthcare sector in Q3 2024, while Savills reports a slightly higher figure of €130 million, and Cushman & Wakefield reported €330 million after including the recent Vamed portfolio acquisition by PAI Partners. Although these figures suggest variability in transaction tracking, they signal that the market is not experiencing a substantial upswing. Total turnover remains low, with a cumulative €590 million through Q3, a 30% drop year-over-year according to Cushman & Wakefield, though some anticipate a modest rebound by year-end.
Market preferences: existing vs new-build properties
Investor interest is notably concentrated on existing facilities over new-build properties. Jan Linsin from CBRE explains that the discrepancy between buyer offers and necessary seller prices on new-builds, given high construction costs, has led to a focus on existing structures with secure, long-term leases. New developments struggle due to high development costs and persistent operator insolvencies, as highlighted by Cushman & Wakefield's Jan-Bastian Knod, who observed liquidity directed more toward established properties rather than speculative developments. Swiss Life Asset Managers’ Head of Healthcare Transactions, Nikolai Schmidt, corroborates this, noting that investors are increasingly "cherry-picking" assets with proven track records, occupancy rates, and reliable operators to mitigate risk.
In the meagre transaction market, Deutsche Wohnen was about the only company to make notable headlines. Deutsche Wohnen, 80% owned by Germany's largest landlord Vonovia, is a significant stakeholder in Germany's healthcare property market. The firm has made strides in offloading a substantial portion of its care property portfolio, recently selling 26 care homes in a €300 million transaction to Civitas Investment Management. This move aligns with Deutsche Wohnen’s ongoing strategy to exit its care sector holdings, which initially included around 70 properties. Currently, Deutsche Wohnen retains 37 facilities, predominantly in Hamburg under the brand Pflegen und Wohnen, reflecting its transition away from direct involvement in the operational care sector. According to a company spokesperson, Deutsche Wohnen is prioritizing financially favorable exit conditions over a strict timeline, a strategy that may stabilize returns amidst ongoing market uncertainty.
Operator insolvencies and market fragmentation
The healthcare property market faces notable challenges with the insolvency rates of nursing home operators. Data from the German Employers' Association for Nursing Care (AGVP) points to over 1,000 closures or bankruptcies in care facilities since January 2023. This trend, affecting mostly smaller and medium-sized operators, has prompted investors to adopt more cautious approaches, with particular aversion to high-risk nursing facilities. The growing incidence of insolvencies has led to a re-evaluation of risk profiles and a shift in focus to less vulnerable segments like assisted living facilities and outpatient medical centres.
Among operator challenges frequently cited, the German nursing sector’s dependence on foreign labour has been increasingly evident. The Institute for Employment Research (IAB) reports that one in six nursing workers now comes from abroad, with foreign employees sustaining overall employment growth in the sector as domestic numbers decline. This reliance on international staff helps to buffer against labor shortages, although Germany faces competition from other European markets. The Federal Statistical Office projects that an additional 440,000 nursing professionals will be needed over the next 15 years, adding pressure on the sector to maintain service levels amid rising demand and recruitment challenges.
Recent 8th Senior Citizens' Real Estate Forum at Expo REAL
The recent Senior Citizens' Real Estate Forum at Expo REAL revealed industry sentiments on the resilience of senior care properties despite the current operator crisis. Jens Nagel of Hemsö, speaking at the forum, acknowledged that while operator challenges have "separated the wheat from the chaff," the sector has preserved rent stability with only a 3% decline. The panel underscored a price correction phase that opens attractive entry points for investors looking to capitalise on the sector's stable, long-term potential.
However, hurdles remain, including stringent regulatory requirements and operator qualifications that make new entries challenging. Industry leaders called for deregulation to reduce operational costs, emphasising that without government intervention, the financial strain on both operators and investors could intensify.
Financial distress in German hospitals has also been increasing. Figures from the German Association of Statutory Health Insurance Funds indicate a rise in hospital insolvencies, with the rate of closures doubling from mid-2022 to mid-2023. Economic pressures, compounded by the anticipated closure of small acute-care hospitals under a federal reform, underscore a shift towards outpatient healthcare facilities. Market players like The Healthcare Experts Group (THE) aim to address this need by promoting new outpatient-focused healthcare centres that consolidate various medical services and prioritize accessibility and functional flexibility.
The Healthcare Experts Group (THE)
Berthold Becker of TSC Real Estate, the driving force behind the THE joint venture, sees an urgent need to restructure inpatient clinics and further development of outpatient-oriented care structures, ‘which are not yet available in large numbers, but will be urgently needed in the future,’ he says. The THE initiative aims to meet rising demands for accessible, integrated healthcare facilities by developing patient-focused “Port centres.” As Becker describes them, these centres combine a broad spectrum of healthcare services, from general practitioners to specialty care and preventive services, under one roof.
In Becker’s vision, these Port centres would not only provide medical care but also integrate social and community functions, such as spaces for public health initiatives and partnerships with schools or kindergartens. This approach would create a community-centric environment that supports preventive health measures and reduces the burden on hospitals. He envisions approximately 1,500 such facilities to address the growing demand as Germany’s population ages.
To fund these ventures, Becker advocates for institutional investment, despite the relatively small scale of individual Port Centres compared to typical healthcare investments. Alongside new builds, THE plans to repurpose existing structures, such as unused commercial spaces or former clinics, especially where new land is scarce. The model not only supports efficient healthcare delivery but also aims to create high-demand, flexible real estate assets that align with investors’ long-term goals. REFIRE will be following the initiative with close interest.
