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Best practice in care home development

Ben Hartley discusses what you need to know if looking to develop a new care home.

Although, given a choice, the majority of older people would prefer to remain living in their own home, there will always be a need for care home provision. While the care home population remains relatively stable, at around 3% of over 65s according to the Office of National Statistics, the increasing longevity and complexity of needs, such as a diagnosis of dementia in the oldest old, means the demand for good quality care is outstripping supply.

As a result, the need to develop new care homes has never been more urgent. The well-publicised study by The Lancet in August 2017 predicts that more than 70,000 care home places will be needed by 2025. Analysis by Which? published in October 2017 found that, at current levels of placement, 87% of councils across England responsible for providing social care may not have enough care home places by 2022 to meet potential demand.

When it comes to care home development, there is also strong appetite from investors who want to see high grade assets, supported by good quality care operators, developed in sustainable locations. So, if we need care homes, and investors want to invest in the right assets, what factors do you need to consider when developing a new care home?

Demand

The demand for care in any location is one of the most important considerations. While a shortfall of care bed spaces is expected across the country, there are regional differences in demand, driven by demographics.

The age profile of the location’s population can have a big impact on local demand. Somerset, for example, has one of the highest numbers of older people per head of population, although ironically it is not well-served by dementia care homes and has the lowest proportion of specialist dementia beds anywhere in the UK.

Rural areas tend to have a higher proportion of older people, although absolute numbers will be higher in urban areas simply because the population is denser.

Competition

Understanding the competition in your target location is as important as understanding the local demographics. Not only is it important to identify the total registered care home capacity in an area, it’s also important to assess the quality of that registered capacity.

Research by Knight Frank has found that some 85% of care homes are over 50 years old, and given that many don’t have en-suite or wetroom facilities, they may not pose a competitive threat to a new care home development. If the supply of en-suite wetrooms is low, demand for a new ‘market standard’ care home could be high. This means that careful analysis and inspection of the competition, including planned supply, is essential.

Shortfall of places

Once you have analysed the demand for care home places, and assessed how much of the competition is offering market standard accommodation, you can work out if there is a shortfall of care home places in the locality.

A shortfall means there is unsatisfied demand for care that your new development could meet. If there is no shortfall…move on.

Location

Location, location, location. People are ageing in every corner of the country, but there is considerable regional variation in the demand for private care, influenced by housing wealth.

It’s crucial to determine whether the underlying wealth profile of the area will support the fee rates you are trying to achieve. It may be that the local authority is seeking to make care home placements, so for some operators a block contract with local commissioners could be part of the business plan.

The location of the scheme will also help or hinder staff recruitment, so don’t forget to assess transport links, bus stops and employment levels in your chosen location. You want to encourage your staff to work for you, so in practice you need to think about car parking for nurses, who we know travel an average of 2.7 miles to get to work, and bus stops for care staff, who are less likely to drive.

Availability of staff

Our research shows that care homes have a defined catchment area when it comes to staffing. Knowing whether there will be a sufficient pool of care assistants and registered nurses living within the locality to staff your care home is essential. When you consider that staff shortages mean you could incur unexpected agency fees, or even have to limit your operational capacity, the cost of choosing the wrong location can be very high.

Care home design

Once you’ve identified a great site in a location that meets the criteria above, you will need to assess how the design of your care home will assist or hinder your operational efficiency. Are you going for the ‘wow’ factor? Will you be offering a household design for small group living? Will you have a dedicated dementia unit?

You will need to analyse factors such as gross internal floor area, proportion of communal space to bed space, number and size of bedrooms, number of storeys and the number of bedrooms per floor. Of course, if you engage with the vendor or architect from an early stage, you’ll be able to put your stamp on an initial design.

Meticulous planning

The total size of the older population along with existing and future planned care home supply can have a huge bearing on fee and fill rates for a new development. Likewise, knowing the availability of staff can help mitigate the risk of investing millions of pounds into a new care facility, only to discover you are unable to recruit sufficient staff to run it properly. This all points to best practice in care home development requiring meticulous planning and market intelligence from the start.

Ben Hartley is Co-Founder and Director of Carterwood. Email: ben.hartley@carterwood.co.uk Twitter: @CarterwoodLtd

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