Australia’s healthcare sector outperformed other property sectors in the last 15 years

The sector reported double-digit returns in 2020 alone.

The healthcare sector showed its resilience through the pandemic, with double-digit total returns in calendar year 2020 (Table 6) according to Dexus Research. On an indexed basis, healthcare has outperformed other major property sectors over the past 15 years (Figure 22).

In recent years returns have benefited from capital growth which appears to be due to a structural re-pricing, leading to yields falling back towards those of traditional property sectors. In many cases, long leases to high quality operators underpin the investment.

Here’s more from Dexus Research:

There has been growing competition for healthcare assets from international and domestic players. According to PwC/ULI’s 2021 Emerging Trends Survey, healthcare assets were the most preferred of the main property sectors.

The long-term thematics for healthcare remain strong. Although employment growth in the industry flattened last year as lockdowns limited patient visits, growth forecasts are the strongest of all major industries over the next five years. Solid long-term population growth forecasts, and an increase in spending by an ageing population also underpin the growth outlook for the sector.

Like other sectors, the landscape for health is changing. The acceleration of trends such as telehealth and technological change in medical procedures will contribute to an evolution of the sector, changing the way physical space is used. However, the rate of adoption remains to be seen. The intimate nature of healthcare means that in-person interactions will continue to be important in some form.

Another trend is the shift towards day surgery and shorter hospital stays which broadens the investment opportunities beyond traditional regional hospitals. There are also growing links between healthcare and tertiary education with the establishment of a number of health campuses incorporating medical office buildings that cater to research, treatment and learning. In addition, there are synergies with residential due to a growing need for affordable housing solutions to accommodate hospital staff.

The investible universe for healthcare is significant, totalling around $140bn at Q4 2020. (Figure 24).