Ageing population incentive for healthcare property investment
Erskine and Owen’s E and O Healthcare Properties Fund is raising $3.85 million towards the purchase of the Havelock North healthcare facility in Hawke’s Bay.
An ageing population is driving investment in commercial property leased by healthcare providers such as medical practices and specialist health businesses, says Alan Henderson, director at property investment company Erskine and Owen.
Henderson said properties used by specific sectors, such as healthcare, could command a premium for rental space making it an attractive option for investors.
“With an increasing number of New Zealanders in an older age bracket, it means this demographic has ongoing healthcare needs that helps to significantly underpin the revenues of the tenants in these types of buildings,” Henderson said.
According to Stats NZ, the number of people aged over 65 doubled between 1991 and 2020, reaching 790,000. By 2034 it was expected 1.2 million people would be aged over 65.
“People are living longer and that creates increased demand on services across the board, but especially in the healthcare sector,” Henderson said.
“There is a strong need for quality buildings to accommodate businesses for the long term to ensure they can service growing communities with an older population.”
Erskine and Owen’s E and O Healthcare Properties Fund plans to raise $3.85 million, along with bank finance, to buy a healthcare facility in Havelock North in Hawke’s Bay for the $6.6m.
Henderson said Hawke’s Bay was a popular destination for Auckland retirees who sold up and wanted a more relaxed environment while still having access to amenities.
The Havelock North healthcare facility was purpose-built in 2000 and has eight healthcare-related tenants including Te Mata Peak Practice and Bay Audiology.
Henderson said in an area such as Havelock North commercial land for development was limited, meaning high quality premises would be in demand and rents would continue to track up because of low supply of new premises.
“Investment in healthcare property is also resilient to impacts of future pandemic outbreaks, making them in demand as long term investment options,” he said.
Specialist investment sectors such as healthcare and early childhood centres were becoming increasingly appealing as an alternative to traditional commercial property, and these sectors also attracted significant government funding, had longer lease terms, and tenants were less likely to relocate due to their specialised fitout requirements, he said.
The minimum investment in Erskine and Owen’s Healthcare Properties Fund was $50,000 with a projected 5.75% per annum cash return, before tax, paid monthly. The offer was available only to wholesale investors.
The property was the first for the fund, and more healthcare properties would be added in the future, he said.