As we wrap up 2024, it’s a moment to reflect on a dynamic and challenging year in the primary care property sector. From new developments breaking ground to shifting market conditions and evolving legislation, the year has kept us busy and tested our expertise in navigating an ever-changing landscape.
New Developments
One of the standout achievements this year has been the construction on three new primary care properties, that are nearing completion. These projects, while incredibly rewarding, are a rarity in the current market. Two of these developments have been in the pipeline for nearly 20 years, and seeing them finally progress to construction has been a significant milestone – not just for us, but for the healthcare communities they will serve.
However, the broader picture of new developments is far more challenging. Rising construction costs, higher interest rates, and the difficulty of achieving viable rental levels make it increasingly hard to get primary care property projects off the ground. While new premises bring much-needed modernisation to primary care, they also highlight disparities in rent levels for existing properties.
The Rise of Rent Disputes
One of the most significant trends we’ve seen this year is the sharp rise in rent disputes. With rents for new premises increasing to reflect construction costs and market conditions, many existing premises are undergoing rent reviews that are proving contentious, with landlords seeking rent for existing premises being more closely aligned to the level of rent being achieved for new premises.
Dispute resolution work has become a cornerstone of our activity this year, as we help practices navigate complex negotiations and achieve fair outcomes. The recently introduced Premises Directions, which took effect in May, have added new layers of complexity to the rent review process for leased premises. While there are some positives – such as clearer guidance and increased improvement grant funding – the changes have also created additional hurdles for practices and landlords alike.
An Active Investment Market
In a surprising turn, the investment market has shown notable activity this year. Following the volatility of rising interest rates from mid-2022 onwards, the market has adjusted to a new level of stability. This adjustment has reignited investor confidence, with healthcare properties proving to be a resilient and attractive asset class.
At Primary Care Surveyors, we’ve had a particularly active year in this space. With two medical centre investments under offer and a third set to go to auction in December, we’ve seen more transactional activity than ever before. This trend is encouraging, as it demonstrates the continued appeal of healthcare properties, even in challenging economic conditions.
Lease Consultancy and Ownership Trends
The evolving landscape of GP partnerships has also driven increased demand for lease consultancy services. We’ve noticed a growing trend of retiring partners retaining ownership of premises and leasing them to continuing partners. This separation of ownership and occupation is creating a new layer of complexity in lease agreements, requiring careful negotiation to ensure fairness and clarity for all parties involved.
2024 Legislation and Political Landscape
The release of the new Premises Directions in May brought with it both challenges and opportunities. While the increased funding for improvement grants is a positive step, the adjustments to rent review processes have added complexity for many practices.
Politically, the year has been marked by the anticipation of change following the election. Early promises of increased NHS investment raised hopes, but as the year draws to a close, there’s been little concrete action to support GP premises or infrastructure. We remain cautiously optimistic for meaningful developments in 2025, though there’s a growing sense of trepidation that much-needed reforms may stall.
Looking Ahead to 2025
As we step into the new year, a key question looms: will the government take bold action to address the critical need for healthcare infrastructure? If the vision for moving services from secondary care into the community is to become a reality, significant changes are required.
These include revisiting the rent level mechanisms to make new premises viable and encouraging NHS bodies to move away from reliance on the District Valuer in favour of commercial surveyors. Without these changes, the primary care property sector risks stagnation at a time when innovation and investment are desperately needed.
Final Thoughts
2024 has been a year of progress, challenges, and opportunities. At Primary Care Surveyors, we’re proud to have supported our clients through complex negotiations, legislative changes, and market shifts. As we look to 2025, we remain committed to advocating for the changes needed to ensure primary care properties can continue to meet the needs of practitioners, patients, and investors alike.
Here’s to another year of navigating the complexities of the healthcare property sector and making a tangible difference for our clients and communities.
In the mean time, we wish a Merry Christmas to our clients and partners.
