Outlook

The higher risks associated with the real estate market was underlined by the return of yield decompression in the second half of 2022. The uncertain impact of rent regulation, high construction costs and rising interest rates create a weaker real estate market environment. At the same time, inflation, higher mortgage rates and high energy prices negatively impact consumer confidence.    

The structurally higher interest rates are likley to lead to further yield decompression and impact the value of health care real estate, as higher cost of capital in turn will lead to increased return requirements. This trend started in Q4 and was off set by the rental increase achieved through annual  indexation. 

For the near future it is also foreseen that the prevalent high construction cost levels will limit the feasibility of realisation of new projects.

The long term trend for the AL&C Fund is likely to remain favourable based on the significant shortage of health care real estate in combination with the long term demographic trends.

The AL&C Fund is well capitalised but short term growth objectives might however be hampered due to a lack of feasible new projects. The existing modern and energy efficient portfolio remains resilient in the current market environment.

For the first half of 2023, we expect further yield decompression which might lead to negative valuation outcomes and impact returns.

Amsterdam, the Netherlands, 24 April 2023

Wim Wensing, Fund Director and Portfolio Manager

Niclas von der Thüsen, Director Finance and Risk

Susan van de Koppel-Nagelmaeker, Portfolio Manager