Health care: is an emerging real estate asset in UAE

JLL has recently released a report called Healthy Returns, highlighting the opportunities for investors and other real estate players in the healthcare market across Mena (Middle East and North Africa) over the next five years as the region responds to an ageing population and increased demand for hospital beds and other healthcare facilities.

The education and healthcare sectors share a number of common characteristics that make them attractive to potential real estate investors, developers and contractors. These include a growing demand, a current shortage of supply as well as strong government support to improve the social infrastructure and, therefore, the economic competitiveness of the region.

With returns from traditional real estate assets declining, investors and other real estate stakeholders are spreading their wings and exploring opportunities across a range of “alternative assets”. The largest two alternative sectors to date have been education and healthcare, where governments across the region have sought to increase the involvement of the private sector in response to lower levels of government revenue in the era of lower oil prices.

With the current shortage of hospitals, clinics and other healthcare facilities, an ageing population and the rise of medical tourism, there is a pressing need for additional healthcare facilities in the region over the coming years. To merely keep pace with the forecast population growth will require around 10,000 additional beds which is equivalent to around 70 new hospitals in the 5 major cities across the region (Dubai, Abu Dhabi, Riyadh, Jeddah and Cairo. Given the current constraints on government spending, the ambitious plans to improve healthcare provision in the region will depend upon attracting greater private sector investment.

Spending on healthcare in the region is currently below well below global best practice. Mena has just 1.9 beds per 1,000 population in comparison to the OECD (Organisation for Economic Co-operation and Development) average of 4.8 beds. Governments across the region have recognised the need to increase the level of healthcare provision and there is therefore strong government support for creating more hospitals and other medical facilities. To achieve the same provision of hospital beds as current available across OECD countries would require a staggering 470,000 additional beds, which equates to 3,130 new hospitals to be developed in the 5 cities covered by JLL by 2022.

Another factor driving demand for healthcare facilities is the growth of medical tourism. Governments across the region are seeking to reverse the outflow of patients seeking medical treatment elsewhere, with up to 30,000 UAE citizens currently travelling overseas for medical treatments each year. The Dubai Health Authority and other agencies are actively seeking to reverse this trend and attract 500,000 medical tourists by 2020.

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