As the UK’s population quietly but decisively grows older, a powerful shift is underway. This shift is reshaping not just healthcare, but the very foundations of real estate investment.

In this second instalment of our series on the mega trends defining the “next generation” of property, we explore how longer life expectancy and the rapid rise in the over-85 population are driving urgent demand for modern, resilient healthcare infrastructure. From GP surgeries to care homes, these essential assets are emerging as both a societal necessity and a compelling investment opportunity.

Life expectancy has increased dramatically over the last few decades, and this is having an enormous impact on the infrastructure required to service an aging population.

The over 85s is the fastest growing cohort in the UK and it's estimated that its number will double to 3.4 million by 2047. As people over 85 will, on average, use healthcare services more than 10 times per year, demand for the services they depend upon will naturally increase. That means more demand for hospitals, doctors’ surgeries and care homes.

Increased investment in the healthcare sector is desperately needed. The private sector has stepped up to support efforts to improve the infrastructure required for the care of the elderly, in part in response to the NHS 10 Year Health Plan.

Using the PACE framework – physical assets, compounding earners – helps to understand the attraction for investors. Specialist real estate investment trusts (REITs) investing in hospitals, doctors’ surgeries and care homes offer the prospect of long-term, inflation-linked and in some cases government-backed rental income.

For example, Primary Health Properties (PHP is a diversified healthcare REIT which owns a portfolio of more than 1,000 essential healthcare infrastructure assets across the UK and Ireland. Case in point is Eastergate Medical Centre in West Sussex, a newly developed neighbourhood health centre which offers a range of primary and community care services, supporting NHS efforts to move services away from over-stretched hospitals.

2025 was an important year for PHP due to the successful acquisition of listed peer Assura. There was a protracted bidding war, signalling strong demand from a range of investors for mission-critical healthcare assets. Gravis was a vocal shareholder throughout this process, advocating for a combination with PHP in order to keep these attractive healthcare assets in public markets.

PHP recently published results for 2025, offering the first formal indication of how the integration of Assura is progressing. According to CEO Mark Davies, PHP has adopted a “best of both” approach to combining the two businesses and has already achieved £7.5 million of synergies to date. As it relates to the full year results specifically, PHP grew adjusted earnings per share by 4.3% and its dividend by 2.9%, which means that the company has now grown its dividend for 30 consecutive years, an achievement bested by only a handful of REITs globally.

Whilst PHP offers investors exposure to all types of healthcare real estate, Target Healthcare is a pure play on care homes. Target’s portfolio of 86 homes is best in class; space per president is 20% higher than that which peers offer, en-suite wet rooms come as standard (vs just 36% for the wider care homes market) and, importantly for real estate investors, all of Target’s buildings have an Energy Performance Certificate of B or better. An attractive feature of this sub sector is the prevalence of long-term, inflation-linked leases. Target’s portfolio is let to a diverse range of care home operators and rents are well covered by operators’ earnings. These inflation-linked rents translate into a healthy, growing dividend, and in fact Target recently published its highest total accounting return since the company’s launch back in 2013.

The outlook is positive for companies associated with the ageing population mega trend, driven by structural demographic forces and clear policy tailwinds. Demand from investors for mission-critical healthcare assets remains robust, and following a bumper year for M&A activity in the sector in 2025 (especially within the care homes sub sector), it’s possible we’ll see more deals in 2026.

For PACEmaker PHP, next steps include progressing the integration of Assura and selling the private hospitals it acquired during the transaction. On the operations front, the trend in rental growth is headed in the right direction; having delivered a 3.2% increase in rents in 2025, the annualised rate of growth through the first few months of 2026 was 3.4%.

Important information

This article is issued by Gravis Advisory Limited (“GAL” or the “Firm”)), which is authorised and regulated by the Financial Conduct Authority. GAL’s registered office address is 24 Savile Row, London, United Kingdom, W1S 2ES. The company is registered in England and Wales under registration number 09910124.

TM Gravis UK Listed Property (PAIF) Fund (the “Fund”) is a sub-fund of TM Gravis Real Assets ICVC, which is a non-UCITS retail scheme and an umbrella company for the purposes of the OEIC Regulations. The Fund is a Property Authorised Investment Fund (“PAIF”).

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