What effect will Covid-19 have on the primary healthcare sector?

Acting as the ‘front door’ of the NHS, Primary Healthcare is the first point of contact to the national healthcare system. This sector is mostly made up of General Practice and was allocated around £9bn of government funding for 2021/22, around 5% of the total £181.4bn English public healthcare budget. Despite the sector’s size and dependence on bricks-and-mortar, in the form of GP surgeries, it has been largely ignored by property investors. The sector only has two, truly large-scale dedicated UK investment funds. This partly reflects the time and effort required of accumulating a multiplicity of often small investments.

Still this niche market is growing. Despite a move to remote consultations, primary healthcare investments were largely unaffected by the pandemic. The government has not flinched from its contractual liability to underwrite rents and as far as any pandemic can allow, it’s been ‘business as usual’ for investors. And the stability and security over this time has attracted further investor interest.

We expect this stability and security to last. Especially so with the British NHS healthcare system of “free at the point of delivery” (albeit financed via central tax revenues) which provides a permanent governmental commitment - and the pandemic has only reinforced its entrenchment in society. While there will likely be some legacy effect from the pandemic, whereby remote consultations have become acceptable for some patients, particularly time poor workers, the demand for physical consultations will return. For primary care patients who are more prone to illness (i.e. young families with children and the elderly), personal contact with a doctor in the privacy of a consulting room is essential. So primary care services will remain underpinned by its real estate.

Over recent decades the NHS has come under increasing pressure due to unceasing demand, heightened by the substantial increase in the UK population, and with the health challenges of people living longer. This has had a knock on effect and its estate is insufficient for modern use. Finding adequate space is a perennial challenge and even with many staff working remotely during the pandemic, this problem has persisted. NHS England recently allocated funding for another 26,000 staff, in primary care premises across the country within the next three years, and it has already taken on an initial 9,000 people. As a result, there is more pressure than ever on space. This will require expanding existing facilities or relocating to larger facilities.

The government lack the resources to meet capital costs sufficient to expand the real estate, but do have the year-on-year cashflow income of tax revenue to meet rents. This provides an opportunity for the private sector to invest through existing delivery models such as Third Party Development “3PD”, Public Private Partnerships and hybrid models which are beginning to emerge.