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DEVELOPMENT FINANCE IS KEY TO HEALTHCARE SECTOR RECOVERY

Developers starved of cash are unable to take advantage of plummeting land values, according to King Sturge

The UK‘s healthcare sector is being starved of new development finance which is hampering its emergence from recession.

And those developers eager to take advantage of the anticipated growth in demand for healthcare will be left “frustrated”, according to an expert.

James Hanson, Bristol-based partner and Head of Healthcare at international property consultants King Sturge, said: “Healthcare in the UK is undergoing its largest transformation since the inception of the NHS over 60 years ago.

“However while the public sector is supported by government funding, albeit to a lesser extent now as a result of the high level of public debt, the private sector is experiencing a more turbulent ride.”

Mr Hanson described development finance in the current economic climate as an “oxymoron” but added that it was a “key ingredient” of any recovery.

“With lack of confidence rife in the financial sector those developers seeking to take advantage of the upsurge in demand for healthcare uses and substantial falls in land values remain stifled and frustrated,” he said.

He added that those who once viewed healthcare as being a “recession-proof” sector were having to re-evaluate that assertion following the worldwide credit crunch and subsequent recession.

“I think the tag ‘recession-resilient‘ is far more appropriate,” said Mr Hanson, “you only have to look at one of the major providers, such as the Four Seasons Health Care Group which, before a successful restructuring of its debt recently, looked like it might be put up for sale after defaulting on debts of over £1 billion, to see how the sector has been hit.”

However, Mr Hanson continued, those developers lucky enough to have cash or credit facilities were in a fantastic position to take advantage of lower land values and competitive build costs.

“But those new to the market with no track record or pipeline of cash are experiencing the harsh, raw reality of this recession,” he added.

“There is no doubt that both the public and private healthcare sectors require new capital, new infrastructure and new ideas, but for now the void between the two is widening because of the private sector‘s inability to source development funding.

“This has lead to a number of our clients considering joint ventures in order to bring forward projects and meet the pent up demand that the lack of recent construction has left.”

Mr Hanson, who was recently awarded ‘Most Outstanding Head of Healthcare / Corporate in the UK in 2009‘ at the UK Over 5‘s News awards, said: “With NHS Trusts becoming more financially independent elective care will be increasingly outsourced to the private sector, creating greater public/private opportunities.”

He added: “As government spending on NHS healthcare projects dries up and budget cuts kick in, coupled with a much-needed return of development finance, the private sector will be in the ideal position of being able to step in and continue the public sector build programme and bring those fresh ideas and opportunities to fruition.”

ENDS   14th October 2009

For further information please contact Louie Hadley, Sturgess Van Damme, on 01275 349011 or email louie@sturgessvandamme.co.uk