The increasing importance of UK healthcare property as an alternate property sector
| Pages | 466-478 |
| DOI | https://doi.org/10.1108/JPIF-03-2018-0019 |
| Date | 17 July 2018 |
| Published date | 17 July 2018 |
| Author | Graeme Newell,Muhammad Jufri Marzuki |
| Subject Matter | Property valuation & finance,Property management & built environment,Real estate & property |
The increasing importance of UK
healthcare property as an
alternate property sector
Graeme Newell
Department of Economics and Finance, School of Business,
University of Western Sydney, Penrith, Australia, and
Muhammad Jufri Marzuki
School of Business, University of Western Sydney, Penrith, Australia
Abstract
Purpose –Amongst the alternate property sectors, healthcare property has recently become an important
property sector for major investors such as pension funds in the global property landscape; particularly in
the UK, and being driven by the ageing population demographics. The purpose of this paper is to assess the
significance, risk-adjusted performance and portfolio diversification benefits of UK healthcare property in a
UK property and mixed-asset portfolio over 2007–2016. Both healthcare property and listed healthcare
property channels are assessed. Drivers and risk factors for the on-going development of the healthcare
property sector are also identified.
Design/methodology/approach –Using annual total returns, the risk-adjusted performance and
portfolio diversification benefits of UK healthcare property over 2007–2016 is assessed. An asset allocation
diagram is used to assess the role of both healthcare property channels in a UK property portfolio and in a UK
mixed-asset portfolio.
Findings –Both UK healthcare property and listed healthcare property delivered superior risk-adjusted
returns compared to UK property, stocks and listed property over 2007–2016, with portfolio diversification
benefits in the fuller mixed-asset portfolio context, but not in a narrower property portfolio context.
Importantly, this sees both UK healthcare property channels as strongly contributing to the UK property and
mixed-asset portfolios across the entire portfolio risk spectrum and validating the property industry
perspective of healthcare property being low risk and providing diversification benefits in a mixed-asset
portfolio. However, this was not to the loss or substitution of traditional direct property exposure.
Practical implications –Healthcare property is an alternate property sector that has become increasingly
important in recent years. The results highlight the important role of both healthcare property channels in a
UK property portfolio and in a UK mixed-asset portfolio. The strong risk-adjusted performance of both UK
healthcare property compared to UK property, stocks and listed property sees both UK healthcare property
channels contributing to the mixed-asset portfolio across the entire portfolio risk spectrum. This is
particularly important, as many investors (e.g. pension funds) now see healthcare property as an important
property sector in their overall portfolio; particularly with the ageing population dynamics in most countries.
The importance of both healthcare property channels sees healthcare property exposure accessible to both
small investors and large investors.
Originality/value –This paper is the first published empirical research analysis of the risk-adjusted
performance of UK healthcare property, and the role of healthcare property in a UK property portfolio and in
a UK mixed-asset portfolio. This research enables empirically validated, more informed and practical
property investment decision-making regarding the strategic role of both healthcare property and listed
healthcare property in a portfolio.
Keywords Institutional investors, Risk-adjusted returns, Asset allocation, Healthcare property,
Healthcare property channels, UK property sector
Paper type Research paper
Introduction
The alternate property sectors have taken on increased importance with institutional
investors suchas pension funds and sovereignwealth funds in recent years.This includes the
alternate property sectors of self-storage, healthcare,data centres, childcare centres,education
facilities, timberland, farmland and university student accommodation. This has seen the
institutionalising of several of these alternate property sectors in many countries, driven by
Journal of Property Investment &
Finance
Vol. 36 No. 5, 2018
pp. 466-478
© Emerald PublishingLimited
1463-578X
DOI 10.1108/JPIF-03-2018-0019
Received 16 March 2018
Revised 27 April 2018
Accepted 30 April 2018
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1463-578X.htm
466
JPIF
36,5
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