Investing in the UK healthcare sector can potentially generate consistent, risk-adjusted returns while delivering a positive social impact. Will Ridley, investment director – property at Royal London Asset Management, explains.
At Royal London Asset Management, our approach to alternative property investment is underpinned by a commitment to resilient, and income-driven returns. Nowhere is this more evident than in our dedicated healthcare strategy, which targets the UK’s elderly, specialist, and intermediary care markets.
Why healthcare, why now?
The UK faces a pronounced supply-demand imbalance in care provision, driven by an ageing population, rising chronic health needs, and a legacy of underinvestment in modern care facilities.
The over-85s population is forecast to grow from 1.7 million in 2027 to 2.8 million by 2040, and to 3.6 million by 2050. To keep pace with demographic pressures, an additional 319,000 care beds would be required. However, the sector has lost over 52,000 beds since 2000, with 40,000 beds lost since 2010 alone, and a potential deficit of 62,000 beds by 2032 if current trends continue.
The UK has one of the lowest hospital bed ratios per capita among comparable European countries (2.2 beds per 1,000 people in 2022, down from 4.0 in 2000), and 76% of care homes are more than 20 years old, with 27% converted from other uses and many lacking ensuite or wet room facilities.
Demand is further fuelled by:
- Increasing prevalence of chronic conditions and dementia in the elderly.
- Rising expectations for high-quality, hotel-style accommodation.
- Government policy pressures to reduce ‘bed blocking’ in the NHS and integrate health and social care.
- A fragmented market, with 75% of providers owning just one home, often lacking the scale to invest in upgrades.
Investment philosophy
Modern, purpose-built assets:
• All homes are designed to the highest standards, with 100% ensuite wet rooms, generous communal spaces, and strong sustainability credentials: 87% of homes are EPC A, and 100% are EPC B or better.
• Homes feature ground/air source heat pumps, solar PV, EV charging, and some even benefit from battery storage. Minimum requirements include site size (1+ acre), bedroom size (14–16 sq m), and day space (5–7 sq m per bed).
Sustainability and ESG:
• Our property team are guided by a proprietary Sustainable Design Brief (SDB) and Sustainable Asset Management Brief (SAMB), developed with Cundall and other specialist consultants.
• Strong engagement with operators with data sharing and regular reporting on energy, water, waste, GHG emissions, and social impact KPIs.
• Driving specifications within the sector (per the above). Currently reviewing homes and looking to improve biodiversity & natural habitats at trial homes. All assets are benchmarked for energy efficiency and future-proofed against regulatory change.
Long-term, resilient income:
• Royal London Asset Management favours long leases (typically 30–35 years) with established operators which seek to provide secure, inflation-linked income streams. Minimum unexpired lease terms are 20 years, with fixed or index-linked uplifts (cap and floor).
• Institutional lease structures include rigorous clinical governance, annual building surveys, quarterly financial and operational reviews, and cross-collateralisation across portfolios for downside protection.
• Clinical assurance is embedded from acquisition due diligence, with ongoing audits, best practice sharing, and rapid response to regulatory issues.
Partnership and pipeline
Royal London Asset Management’s healthcare platform is built on strong relationships with leading developers and operators, enabling us to source opportunities off-market and deliver best-in-class homes. The current portfolio comprises 25 modern care homes (1,697 beds), with a robust pipeline of new developments nationwide and £200m+ of identified opportunities going into 2026.
We work programmatically with operators, focusing on locations with clear demographic demand and delivering assets that meet both investor and occupier expectations. The operator base is diversified across ‘Super Prime’, ‘Prime’, and ‘SPV+’ covenants, with a mix of not-for-profit and private operators.
Impact and opportunity
By investing in the UK healthcare sector, Royal London Asset Management is not only seeking to generate consistent, risk-adjusted returns but also aiming to deliver a positive social impact:
- Modernising the nation’s care infrastructure providing new, high-quality capacity.
- Improving outcomes for vulnerable populations, including the elderly and those with specialist care needs.
- All new homes fossil fuel-free, and delivering measurable social and environmental benefits.
- Our portfolio is designed to be resilient to market cycles, with healthcare values showing to be particularly robust during recent market repricing, and the sector forecast to remain well-positioned for the next five years.
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This is a financial promotion and is not investment advice. Capital at risk. Past performance is not a guide to future performance. The value of investments and any income from them may go down as well as up and is not guaranteed. Investors may not get back the amount invested. The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice. Forward looking statements are subject to certain risks and uncertainties. Actual outcomes may be materially different from those expressed or implied.
Issued in October 2025 by Royal London Asset Management Limited,80 Fenchurch Street, London, EC3M 4BY. Authorised and regulated by the Financial Conduct Authority, firm reference number 141665. A subsidiary of The Royal London Mutual Insurance Society Limited.