Our desire to look and feel good is paying dividends for investors as well as the community in general. Healthcare’s commercial property sector is on an “exceptionally positive” trajectory according to national auction house Burgess Rawson. The boutique outfit has sold seven times more assets in the sector so far this year and says there is plenty of room for substantial growth, driven by the desire to make not only ourselves but also our pets as content and well as possible.
The diversity of businesses and operational models has been growing and changing across all areas of the healthcare sector. Pet care however is accounting for a large chunk of this transformation according to the agency’s most recent research report, thanks to our fixation on animal companions – an estimated 29 million by most recent figures (RSPCA). Around 70% of Australian households own a pet - dogs being the most common at 50% (6.4 million) followed by cats at 33% (5.3 million) - placing the country’s rate of pet ownership amid the highest in the world. As a result, there has been a rise in the number of veterinary clinics departing from solely treating our beloved animals to those that provide one-stop-shop services such as grooming, boarding or training.
Veterinary clinics have been well represented among biggest sales of healthcare assets, too, in the past few years, including the $5.855 million paid for Adelaide Vet in the South Australian suburb of Westbourne Park in August.
Smaller investors looking for promising opportunities should be reading the recent interest by big players in the pet sector as a major positive Burgess Rawson analysts said. One of the largest of these in recent times has been Woolworths. The supermarket giant made a notable $600 million investment in the Petstock chain of stores late last year, a move that was followed by the acquisition of rival group habitat Pet Supplies by Greencross - the largest provider of high-quality integrated veterinary and pet services in Australia, backed by TPG Capital – as part of a strategic expansion of its pet retailing portfolio.
As for people, the emergence of “comprehensive one-stop healthcare centres with diverse tenancies” is presenting an especially lucrative asset type for investors. Returns from these centres have outstripped those delivered by many other sectors according to Burgess Rawson data and led to their greater popularity among large industry players. Pharmacies are leading the way in this department, as their owners position them as “comprehensive health hubs” that provide not only vaccinations but also such services as weight management programs, medical and diabetes testing, medicine reviews and more.
Another glowing area is that of life sciences. Government funding is a large part of the reason Australia has become a magnet for research & development and in recent years has led to the likes of CSL Limited pouring $800 million into manufacturing capabilities, as well as greater investments by hearing implant leader Cochlear, and by the sleep and respiratory care pioneer ResMed. As with the pharmaceutical industry, such investment “underscores the significance of the life sciences sector in Australia and positions it as a thriving and promising real estate asset class for savvy investors” analysts said.
Call of the country
Healthcare assets in rural areas are also benefitting from the overall sector’s robustness. In this case, impressive returns from these assets have been mostly driven by the pandemic-triggered flight from the cities which saw 70,000 people move to greener pastures during 2020 and 2021. This shift continues to exert its influence with government figures shows regional migration up by 16% compared to pre-2020 despite some of those who initially moved.
What should investors look for? As far as prices go, the general range for healthcare assets is between $750,000 and $4 million. Annual incomes run from an average $30,000 to $250,000. The median sale price at Burgess Rawson auctions has remained $2.1 million since 2022.
When looking to acquire a solid investment that will deliver good returns, it is wise to investigate the quality of the tenant, as well as the lease’s assignment provisions – to ensure that the tenant can’t pass the lease on to a less profitable or secure operator.
Healthcare providers tend to seek long-term leases which is one of the greatest attractions of this sector for investors. And it’s also worth noting that regional assets can often be some of the best healthcare assets to acquire especially if they are a sole provider in their area.