Publication

UK Primary Healthcare Real Estate

Article

Contacts & Related Research

Primary Care returns to the forefront of UK Healthcare Policy

Contents


Introduction

Primary Healthcare facilities, such as General Practitioner (GP) surgeries, offer investors long-term, government-backed rental income. The UK Government is prioritising care in community settings, with plans to develop Neighbourhood Health Centres and a strategic focus on prevention over treatment.

After over a decade of limited investment, Primary Care has returned to the forefront of national policy, as highlighted by the NHS’s Fit for the Future: 10-Year Health Plan for England, released this month, a national strategy aimed at driving long-term system reform, with Primary Care as a central focus.

The NHS is still grappling with a major backlog of appointments following the disruption caused by Covid-19. While demand has risen, the number of fully qualified GPs has not kept pace with that demand, or with population growth.

There has, however, been the introduction of approximately 40,000 non-GP clinicians, funded through the Additional Roles Reimbursement Scheme (ARRS) by Primary Care Networks (PCNs), to support the workforce and provide more integrated, multidisciplinary care within general practice.

This includes pharmacists, physiotherapists, paramedics, and social prescribing link workers. While the introduction of these roles has helped meet rising demand, the expansion of staff and services in GP surgeries, set to accelerate through the rollout of Neighbourhood Health Centres under the NHS’s 10-Year Plan, has placed increasing pressure on an estate that is already undersized and outdated.

As the system moves toward more integrated, community-based provision, the UK’s Primary Care infrastructure will require a fundamental overhaul, with more modern, purpose-built facilities needed to support current workforce models and deliver future service ambitions.

Prime yields in the sector have been stable at 4.5%, supported by strong fundamentals and increasing investor demand, and also now driven by government backing and a renewed policy emphasis on Primary Care services across the UK.

Investment is on the Road to Recovery

The past few years have been challenging for UK real estate markets. Rising interest rates have impacted investment activity across all sectors, and Primary Care has been no exception.

However, as the economic backdrop improves, government backing for Primary Care investment strengthens, and falling interest rates make debt more accessible, market activity is returning, and we are seeing new groups of investors enter the sector following Covid.

One of the key drivers of increased activity is the stabilisation in yields since the market shift in late 2022, with rental growth helping to offset outward movement in capital values.

The latest valuations from Primary Health Properties (PHP) and Assura provide further evidence of resilience within the sector, giving investors confidence that now is an attractive time to enter the market or expand their existing holdings, with a strong likelihood of tighter yields over the medium term.

A flight to quality and secure, long-term income property investments, which Primary Care offers, was a trend before the interest rate spike. Given the continued uncertainty in the macroeconomic environment, this trend is expected to intensify, particularly as interest rates continue to reduce.

Alongside the likes of PHP, Assura and BlackRock, who are long-term investors in the market, in recent years a growing number of non-sector specialist investors have also been showing interest.

In May 2024, Assura and pension scheme USS announced that they had entered into a new £250 million joint venture to support investment in essential NHS infrastructure, including GP surgeries. More recently, in May 2025, KKR and Stonepeak made an offer to acquire Assura, which was later set aside in favour of a proposed merger with PHP, subject to shareholder approval.

Strong interest from a broadening investor base, including private equity, pension funds, institutions, REITs, infrastructure funds, and private investors, highlights the renewed appeal of UK Primary Care real estate as a resilient and income-secure asset class.

Safe and Secure Government-Backed Income

The asset class is particularly attractive to investors given its high degree of income security from the NHS, which provides GPs with rent reimbursement. Recently this appeal has been further strengthened by increased government health spending and a clear policy shift toward preventative care, as outlined in the NHS 10-year Plan. This is expected to drive greater reliance on Primary Care services.

Institutional lenders are seeing some, albeit limited, interest from GPs in acquiring their own real estate, which was uncommon until recently. At the same time, investors report that raising debt for large-scale acquisitions in the sector is becoming significantly easier.

There is a marked difference in the yield profile for assets depending on the remaining lease term in place. Surgeries with short dated leases, which typically include older surgeries, have yields c.75 basis points higher than those for new build investments with 20+ year leases in place.

Assets with five years or less remaining on their leases represent a relatively new segment of the market, with most properties built between 2000 and 2010. As this market has yet to fully mature, yields remain widely spread. However, variation in yields even within similar lease profiles suggests an emerging divergence between primary and secondary assets.

New Impetus for Rental Growth

GP surgeries are typically let on long-term leases, with rents reimbursed by the NHS, providing investors with secure, long-term, government-backed income. These leases usually include three-yearly rent reviews, offering more frequent opportunities to capture rental growth than standard five-year commercial lease cycles.

Open market rents for Primary Care properties have historically lagged inflation (RPI), with the gap widening in recent years (see Fig. 3).

However, the outlook is improving. Construction costs have risen faster than inflation but have now stabilised, while investment yields have reset, placing upward pressure on rents.

To support new development, rental growth above the ten-year average is required to establish a new benchmark.

However, investors note a consistent mismatch between the rents deemed acceptable in public sector value-for-money assessments and the rent levels developers require from day one to make projects financially viable, with one investor citing differentials of up to 33%.

One potential solution would be the introduction of ‘green’ rental premiums for net-zero carbon (NZC) buildings, an approach that would both align with NHS England’s decarbonisation objectives and improve the investment case for modern, sustainable healthcare assets.

Unlocking the new development required to deliver the NHS’s 10-Year Plan will require upward pressure on rents to improve viability and attract capital

Thomas Atherton, Strategy & Market Intelligence Manager, Savills OCM

The market is at an inflexion point: after a period of elevated interest rates and lagging rental growth, a near-term rise in rents is likely as lease contracts come up for review. Investor confidence in future rental growth is underpinned by sustained government support for Primary Care, now formalised in the NHS 10-Year Plan, alongside demographic tailwinds such as an ageing population and a structural undersupply of modern, purpose-built medical centres.

As of 2022, around 20% of Primary Care premises were built before the NHS was established in 1948, and over 22% were reported by GPs as not fit for purpose, an issue highlighted as a key concern in Lord Darzi’s 2024 Independent Investigation of the NHS in England. A 2023 survey by the Royal College of General Practitioners found that 88% of GPs lacked sufficient consulting room space, underscoring the widespread inadequacy of the current estate.

Primary Care rents continue to grow at a rate below other commercial property sectors, averaging below 2% annually over the past ten years. Rental growth in UK Industrial and Logistics assets averaged 6.5% per annum over the five years to 2023 (MSCI), and Savills forecasts prime Central London office rents to rise by 4–4.5% per annum over the next five years from May 2025, both driven by supply-demand imbalances.

Supply constraints and rising demand in the Primary Care sector are expected to support future rental growth. Unlocking the new development required to deliver the NHS’s 10-Year Plan will require upward pressure on rents to improve viability and attract capital, with investors anticipating rental uplift driven by structural demand, echoing trends observed over the past decade.

Strong Political Support for Primary Care

In his 2024 Independent Investigation of the NHS, Lord Darzi warned that the system is in “critical condition” and called for a strategic shift toward strengthening Primary Care.

He cited chronic under-investment and argued that increased GP funding is essential to improving access, relieving pressure on hospitals, and restoring efficiency.

The Government’s June 2025 Spending Review committed to a £29 billion real-terms increase (£53 billion cash uplift) in annual NHS day-to-day spending between 2023/24 and 2028/29, equivalent to 3.0% average annual real-terms growth. It also included a £2.3 billion real-terms annual increase in the Department of Health and Social Care’s capital budget by 2029/30, a more than 20% real-terms rise, supporting investment in technology, hospitals, and Primary Care.

NHS England is set to be reintegrated into the Department of Health and Social Care over the next two years, and the Government’s NHS 10-Year Health Plan has a core focus on strengthening Primary Care and directing investment toward the most underserved areas. A key priority outlined in the plan is shifting care provision into the community through the creation of 250–300 GP-led neighbourhood health centres that co-locate diagnostics, outpatient, mental health, and social care services.

This marks a major shift for GPs, who will increasingly work within integrated teams rather than in small standalone practices. As a result, there is likely to be growing opportunity for private sector investment in new services and infrastructure.

The plan also states that these centres will be prioritised in areas of greatest deprivation, with the aim of reducing health inequalities and expanding access in communities facing the highest levels of unmet need.

Furthermore, the Treasury’s 10-Year UK Infrastructure Strategy (published June 2025) sets out a clear ambition to expand the role of private capital in funding and delivering national infrastructure. It also states that the Government will rapidly explore the use of Public-Private Partnerships (PPPs) in financing Primary Care and community health infrastructure, taking a decision by the Autumn Budget 2025.

Leveraging Private Sector Investment

Central to the Government’s 10-Year Plan is the creation of a national Neighbourhood Health Service, underpinned by a programme of GP-led Neighbourhood Health Centres. Delivering on this vision will require substantial investment in modernising and expanding the Primary Care estate.

The plan explicitly states that it will explore new capital investment models, including greater use of private sector funding, to help unlock delivery, particularly in underserved areas.

Growing policy support for private investment in Primary Care infrastructure presents a clear opportunity for investors to contribute meaningfully to improved access and outcomes, particularly in communities facing the greatest unmet need for GP services.

Notably, while this represents a long-term strategic shift, the plan comes at a time when the NHS continues to face significant care backlogs, high demand for elective procedures, and sustained pressure on waiting lists, factors that will continue to shape service delivery in the near term.

Primary Care outlook
  • The outlook for UK Primary Care real estate is strong, supported by stable yields, improving rental growth, and growing political support.
  • Government funding commitments, support for private infrastructure investment, and a growing supply-demand imbalance, driven by a large patient backlog and an ageing population, signal the start of a new investment cycle.
  • With secure income and structural undersupply, the sector offers a compelling long-term opportunity.


REFERENCES


FURTHER INFORMATION

Savills Operational Capital Markets