What is the market like for smaller, converted care homes?

While we continue to see robust buyer appetite for modern, purpose-built care homes, there is still very much a market for smaller converted care homes throughout the country.

Interest in such stock is primarily coming from a sophisticated ‘new-entrant’ buyer pool that acknowledges the ‘defensive’, needs-driven nature of the sector, its ageing population, and shortage of bed spaces.

This can be seen through the increase in sales to first-time buyers. To illustrate this trend, 9% of our stock sold to first-time buyers in 2024, compared with 4% in 2023.

Who are these buyers and what are they looking for?

Many of these buyers have either a medical (e.g. doctor, pharmacy, nurse) or a financial background. They are not geographically constrained in their search and will move house for the right first opportunity in the sector.  

Generally, they are looking for smaller care homes priced under £2 million, which means that they will typically consider period conversions under 30 beds in size.

Why has appetite increased and what does it mean for sellers?

We have seen increased appetite from this buyer pool for a number of reasons. Occupancy levels have now fully recovered from the pandemic and, in some areas, is now exceeding pre-COVID levels. Bed demand in general is very high and there has also been a reduced reliance on agency staff.

Crucially, we have seen increased bank appetite from a number of ‘new to market’ lenders keen to support the sector, giving new-entrants access to funding options that were not available for a number of years.

This is encouraging for the sector as it allows owners of smaller care home to retire and sell their businesses as a going concern, protecting the wellbeing of their residents and securing the jobs for their workforce. Owners of smaller care homes are likely to realise a high sale price as a going concern too, as the trading value of the care home as a going concern will exceed the value on a closed basis.

It also allows these owners to ‘trade-up’ and acquire larger care facilities which increases our buyer-pools and overall investment in the sector.

We don’t believe this is a short-term trend, and fully expect it to continue, especially in areas where there is a lack of new builds coming through.

Can first-time buyers get the necessary funding?

Given its needs-driven nature, the sector has always been a favourable area for lenders to provide finance to both experienced and competent operators, as well as first-time buyers who have the right guidance and support. Any new entrant will need to lean into their strengths and any transferable skills which can demonstrate their ability to operate a care home business.

A good example is the sale of Ty Ceirios Nursing Home in Pontnewynydd, Pontypool, which, in early 2024, was sold through Christie & Co to first-time care home owners. Although new to the sector, they had significant transferable skills that would help them with the running of the home and, as such, were able to put together a strong case for funding, which they obtained through Christie Finance. Their long-term plans are to build a portfolio of quality care homes, with Ty Ceirios providing them with a strong starting point.

Of all the deals that Christie Finance sourced funding for in 2024, 29% were for first-time buyers looking for an average debt size below £1 million, which suggests that the ideal care home for this buyer type costs between £1 million and £2 million.

Over the next 12 months, margins will be squeezed, and the regulatory environment will continue to frustrate. This will likely mean that homes that might ordinarily be perfect for first-time buyers may add further challenges due to debt costs so a first-time buyer will require a significant level of cash to enter the market. However, as long as services provided by the sector continue to be in demand, well-run, profitable homes will offer themselves as a good investment for new entrants and banks, alike.

Advice to anyone considering selling in 2025

If you have a smaller, converted care home that you’re looking to sell, I hope this article demonstrates the demand that remains for such business properties.

If you are considering selling your business now or in the future, here are some key things to think about before you get started:  

• It’s never too early to start thinking about selling: Whether you’re looking to sell in the next year or the next four years, it’s best to engage your advisers early in the process so that they can work with you and your business over time to ensure it’s ready for sale and its value is maximised. 
• Appoint specialist advisers: You’ll need a business broker, accountant, and solicitor, all of whom understand the nuances and complexities of the care market, this will make the process a lot smoother. 
• Gather all necessary information: Before beginning the selling process, gather all necessary documents, including up-to-date accounts covering the last three years and occupancy/fee lists as well as an in-date Energy Performance Certificate (EPC), professional photographs, and floor plans to present the business in the best possible way. 
• Do you want to sell it on a confidential or non-confidential basis: When determining the level of confidentiality, consider if you will communicate the sale to staff members. If so, decide who will be informed about the sale and how you will manage the situation if a staff member becomes aware. 
• Be prepared to show your business off: You’ve invested a lot of time and money into your care home, so show it off and be proud. Ensure that the property is in the best condition and is presented in its best light.  
• Be realistic about the sales timeline: Typically, a care business in the UK will transact between six and 12 months but this can vary from business to business.
• What would you like for the future of your business: Think about who you would like to sell to and take over your business, this will help with marketing the business and will help you decide when the offers come in. 

If you are considering selling your care home, get in touch: rob.kinsman@christie.com or 07717 335 367