Occupation, development and acquisition of property dealing in the life sciences and healthcare sectors has grown significantly over the past few years – and for good reason, according to a recent report on the sectors from Colliers.
Key features for the boost cited in the report include an ageing population and increasing life expectancy, the rising prevalence of chronic and transferable diseases such as Covid-19, and the lift in people’s attitudes towards personal health and wellbeing.
Chris Dibble, Director of Strategic Advisory at Colliers, says the growing demand to cater to these factors is leading to higher leasing, development, and investment activity in this less prominent part of the non-residential property sector.
“While New Zealand’s life sciences and healthcare property sectors are not as progressed as some other major offshore markets, many advancements are being made locally suggesting it’s only a matter of time,” Dibble says.
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“With further growth and evolution in the industry over the next few years, an awareness of the sector’s benefits and an in-depth understanding of market dynamics is becoming increasingly important for all property stakeholders.
“We have undertaken a number of demand and supply, demographic and market benchmarking studies for local and offshore private and listed groups looking to grow in the sector, from an occupational and investment perspective.
“Opportunities are being snapped up by a small but increasing number of parties. While the sector is growing, providing more opportunities overall, the best spots are increasingly facing higher levels of competition as people cotton on to the sector’s advantages.”
A review of recent OECD data by Colliers highlights that out of 52 countries globally, New Zealand was above average in total healthcare expenditure as a percentage of GDP from 2019 to 2021.
Renee Lintott, Senior Analyst in the Strategic Advisory team at Colliers, says one of the underlying demand factors elevating spending in healthcare that New Zealand faces is apparent in many countries.
“A shift in our population age structure arising from the acceleration in the ageing of the population and lower fertility rates is clear,” Lintott says.
“According to the latest Stats NZ data, between 2022 and 2028, the number of people aged 65-plus will increase by almost 20 per cent, reaching around 1 million people.
"This is projected to reach 1.3 million people by 2040 and around 1.5 million people by the 2050s.
“This means that while approximately one in every six people in New Zealand is above the age of 65 currently, this will increase to around one in every four people being over the age of 65 by 2050."
Lintott notes that it is not only public health expenditure that is set to rise as the population ages and governments fight chronic and transmissible diseases, but also growth in the private health insurance sector.
“Furthermore, as a consequence of Covid-19, people’s interest in their own health and wellbeing is increasing significantly, adding further to the sub-components boosting health expenditure.”
Investor appetite for specialised assets such as life science facilities and healthcare centres is set to rise as investors venture further in search of product with strong underlying demand drivers and attractive market yields.
Dibble says investors are bullish on these assets because of their connection to demographic trends, broader insulation from negative economic trends, the stability in cashflow provided from long-term leases, and portfolio diversification, as well as the added benefit of meeting social objectives.
“While an increased level of purchaser enquiry and sales activity is expected to follow, there are barriers and challenges to increasing the level of deal flow.
"Key to this is the specialised knowledge and strategic alliances needed to invest successfully in these sectors, which also tend to cluster geographically around key nodes of expertise and infrastructure.”
The most recent Colliers Global Investor survey highlights the rise in appreciation of the sectors. The results for the Asia-Pacific region noted life sciences was ranked third highest in interest from investors when considering alternative asset classes, while primary and secondary healthcare sectors were ranked sixth and seventh respectively (and second if the results were combined).
- Article supplied by Colliers
