Health precincts are currently among the most in-demand commercial assets in the world, and the market for them in Australia is expanding rapidly.
Changes in the health industry landscape and rising demand are creating appealing investment opportunities for investors looking to diversify away from more traditional asset classes. Between 2008 and 2021, the health property sector had higher returns and lower annualised volatility than other property asset classes.
Healthcare accounts for 9.2 per cent of Australia’s GDP and employs 13 per cent of the working population, making it the largest sector of the economy and the largest employer in the country.
Creating successful health precincts is a complex process that combines evolving models of care, public health services, complementary private healthcare providers, allied health, integrated facilities, and flexible funding solutions, QIC General Manager – Healthcare Nicholas Skulander (pictured above) said.
“They can’t be funded by the public sector…they are capital constrained around what they can and choose to fund and predominately a lot of their money goes to acute hospitals,” Skulander said.
“The next step around creating a precinct, and all of those other services, [is to have] the property industry and organisations like QIC on board.”
Skulander said because it is a relatively new asset class, there is limited knowledge in the industry around what makes a good precinct.
Healthcare precincts have emerged as an important model for the provision of care, and typically incorporates a tertiary public hospital, partner institutions such as a university or private healthcare provider, clustered health services and auxiliary uses such as research, retail, education and residential.
This critical mass of real estate, infrastructure, and people fosters innovation and the establishment of centres of excellence, resulting in not only improved health outcomes but also economic benefits to governments.
A QIC report, Co-Creating Healthcare Precincts, laid out six key factors that contribute to the success of a precinct.
A precinct needs a comprehensiveness of services, a community focus, it needs to encourage collaboration and partnership while being cost-effective, flexible and future proofed as well as having a strong sustainability focus.
Skulander said the Murdoch Health and Knowledge precinct in Perth is an example of a precinct development in Australia.
The precinct is already home to Fiona Stanley Hospital, St John of God Hospital, Murdoch University and South Metropolitan TAFE.
There are plans afoot to add 1,200 dwellings for 2,400 residents as well as 45,000sqm of health, retail and commercial space to complement the emerging health and education precinct.
Skulander said the trick around precincts is that they are not just a series of buildings, but a series of assets that all combine to create one ecosystem.
“What really is important in that creation is that really strong governance right from the start between the precinct partners,” he said.
“So that will be led by government, but you’ve got private health organisations and in those groups, you’ve got a university partner which is beneficial for the universities, they have staff, and students go in and work in the public and the private hospitals.”
Skulander said one lessons born out of the COVID-19 pandemic was the importance of collaboration, something that is needed to deliver a great health precinct.
“No one party can deliver a health precinct,” he said.
“The government can’t do it by themselves, we can’t do it as a private sector and an operator can’t do it. It really requires everyone to come together and work together and trust each other.”