It has been well documented that the depreciation of sterling has been a key driver in boosting tourist numbers in the retail and leisure industries in the UK, with the Office for National Statistics reporting a 19 per cent rise in the number of visitors to the UK in April 2017. However, another sector that has also benefitted from the weak pound is healthcare, with 2017 seeing a surge in healthcare tourists looking to take advantage of London’s world-renowned private medical expertise at an immediate discounted rate.
Primarily focussed on Harley Street, in the heart of London’s West End, the influx of overseas visitors requiring specialist private medical services this year has included a large number of appointments from countries we do not often see referrals from. Historically, medical tourists are from Asia, UAE and South Pacific countries, but more recently there has been a large number of patients from central Europe, the US and Russia, who are taking advantage of the fall in the pound and our increased medical specialisms.
With the availability of world-leading cancer care such as proton beam therapy as well as having access to specialist surgeons, London is the top of the list for health tourism. In addition, the Howard De Walden Estate, which owns most of the buildings across the 92 acres of Marylebone, including the Harley Street enclave, has announced plans to invest £200 million into the estate between now and 2020, including new buildings and renovations.
As a result of this continued commitment and confidence, many private healthcare operators in London, particularly around Harley Street, have expanded their services and units, which is creating a number of opportunities for developers to build specialists practices and create secure long-term income structures.
This is inevitably generating interest from investors with recent activity, including Standard Aberdeen purchasing a £40 million investment property in Harley Street let on a long lease to HCA International Limited. Furthermore, an outpatient facility in West London, let to HCA, has transacted at a yield below 4 per cent with only 15 years remaining certain on the lease, which has been purchased by a Singapore private investor.
With the world-class specialist treatment that is available at London’s private practices, combined with the currency discount against sterling for many overseas patients, the healthcare tourism market is set to continue and will fuel the investment interest in this particular sector. Those properties let to private healthcare operators offer covenant strength and a robust alternative to mainstream central London investments, where office yields in particular have achieved unprecedented levels in recent years.