Managing health and care for sustainable performance

The European healthcare sector remains increasingly popular: being more defensive thanks to its long-term demographic drivers, the healthcare sector has always been a meaningful and defensive diversifier in a multi-asset portfolio. Despite a combination of headwinds related to rising interest rates and some operator’s issues, capital value dynamics have diverged across countries and subsectors of health and care. According to MSCI data, portfolios usually comprising large assets like nursing homes had to deal with a high concentration risk. These were often managed by listed operators, more vulnerable to volatility as triggered in 2021. Conversely, highly diversified portfolios regarding of countries, health and care sectors, as well as non-listed operators, have demonstrated stronger resilience in terms of capital value dynamics and net operating income growth.

In 2024, the healthcare sector accounted for 2.2% of total investment volumes (EUR 189 bn, +4% compared to 2023) in Europe in line with its long-term average. In 2024, investors with in-depth knowledge of the entire value chain in the healthcare sector maintained an active strategy in order to benefit from the opportunities generated by highly leveraged sellers or funds facing redemptions. The strong track record of investors capable of ensuring adequate supply will continue to deliver sustainable income streams over time as long as structural changes in demographics, technology and climate transition are part of the overall performance equation.

Demographic shifts are considered a megatrend which will shape demand for real estate. In Europe, the share of people aged 65+ is set to increase to 25% by 2050, according to the United Nations. The major change will be triggered by 2030, when the 75+ age bracket will surpass the 65–74 age bracket: by 2050, the 75+ age bracket will constitute 16% of the overall population. However, there are country-specific differences in terms of risk factors, diseases, mental health issues (such as dementia) and life expectancy. This also leads to different care needs and therefore a wide range of real estate products and services is necessary to meet these requirements. This also leads to different care needs and therefore a wide range of real estate products and services is necessary to match specific domestic demands.

The integration of artificial intelligence (AI) in elderly care is revolutionising the healthcare system, offering innovative solutions to predict health risks, enhance wellbeing, and improve the overall quality of life for the elderly. The quality and outcome of care related to patient safety, medical effectiveness and patients’ wellbeing can be monitored and assessed through digital solutions. This could help predict potential health risks following of chronic diseases, personalise treatment management, automate routine tasks and allow care workers to focus more closely on psycho-social, heightened and complex patient needs. In many cases, digital solutions improve productivity and thus empower the care staff community. Through gamification and by incorporating a wide range of activities, digital solutions can also stimulate cognition and social awareness. 80% of an individual’s health and wellness is influenced by social determinants.¹ Going forward, recent advances in deep learning, are set to enable the creation of bespoke prevention policies for every patient as well as support the emergence of longevity medicine.

Healthcare has been increasingly competitive over the past few years, with large operators spreading quickly across key markets while emerging outsiders have come forward with new business models. Swiss Life Asset Managers has always favoured a case-by-case methodology at local level, as regulation as well as, financial and social affordability metrics are not homogenous across markets. As such, our pan-European investment strategy avoids concentration risk related to a specific brand, while favouring sustainable operating models for all stakeholders.

Architects form the backbone of the real estate healthcare sector. They are responsible for designing adaptive care solutions and home-like environments that ensure sufficient privacy, with care-friendly infrastructures that enable a sense of community and personalised care.

Buildings must adapt to the people who live in them, not the other way round. Faced with a scarcity of resources and employment laws, care providers need to develop new management and planning methods. Finally, buildings must be anchored in their environment, meaning residents, operators and investors should share the same goals for living, managing and holding buildings sustainably, and work towards minimising their carbon footprint. Labels, appropriate KPI’s and digital property technology should enable the stakeholders to accurately monitor a building’s development along its sustainability pathway.

Swiss Life Asset Managers has been abreast of the demographic trends and has enhanced its range of products in the real estate healthcare sector. We focus primarily on nursing homes, medical office buildings, after care and new submarkets such as rehabilitation and psychiatric clinics. As the wellbeing of seniors is becoming an increasingly important part of healthcare, we are gradually integrating senior housing in our portfolio. Our investment strategy has been designed to fit our company purpose of “enabling people to lead a financially self-determined life” and to accommodate such changes within the European healthcare sector.

¹ Artiga, S., & Hinton, E. (2019, May 29). Beyond Health Care: The Role of Social Determinants in Promoting Health and Health Equity