Will healthcare construction find GCC investors?
The GCC healthcare real estate sector is poised for growth as regional governments look to local medical services and standards
Earlier this month, Oman’s Ministry of Health launched planning initiatives for the construction of a healthcare hub in the Sultanate. Upon completion, the 500ha Medical City, to be developed in the city of Barka, is expected to spur private-sector investment in Oman.
Oman’s plan is one of the GCC’s numerous ventures into the healthcare sector, which is rapidly establishing itself as a viable source of non-oil revenues. Shortly prior to the Sultanate’s announcement, UAE state agency WAM confirmed Dubai Healthcare City Authority will oversee the development of a 7.52ha project in the Emirate’s Jadaf area.
These decisions indicate a region-wide understanding of both the perils of overdependence on petrodollars, as well as the advantages of investing in healthcare projects. In January 2016, real estate consultancy Knight Frank said the demand for healthcare real estate in the Middle East is rising on the back of increased medical tourism in the region.
Remarking on the market dynamics, Matthew Dadd, partner at Knight Frank, said: ‘‘Rising life expectancies, rapidly growing population and per capita incomes, a high incidence of lifestyle-related diseases, and ambitious medical infrastructure projects are driving the healthcare industry’s growth in the Middle East.
“Real estate typically represents 40% of a hospital’s balance sheet, [and is] the third largest expense on the income statement. All too often, healthcare real estate is an untapped asset,” he added.
Out of major healthcare centres in the region, Dubai alone received 118,727 medical tourists in the first quarter of 2015, with medical tourism revenues amounting to $211m (AED775m) during the period. Dubai expects to generate up to $2.6bn (AED9.5bn) in medical tourism revenues in 2020.
Mansoor Ahmed, director at Colliers International, echoes Dadd’s views during a conversation with Construction Week. Ahmed, who specialises in value advisory across sectors such as real estate, healthcare, education, and public-private partnerships (PPPs), says the medical tourism industry in the region, “and especially in Dubai, is observed to be on the rise”.
He continues: “The boom for healthcare in the UAE has predominantly been due to a multi-national and diverse population growing at a rapid pace. The ageing population and the growing popularity of Dubai as a medical tourism destination have also played a major role in the growth of healthcare facilities.”
Ahmed says 46% of the medical tourists to Dubai during Q1 2015 were from Asian countries, 25% from GCC and Arab countries, 13% from African countries, and the remaining 16% from other Western markets.
Dr Marc Harrison, chief of international business development at Cleveland Clinic, identifies five key drivers boosting the GCC as a medical tourism destination.
“Increasing levels of internal and external investment; large numbers of regional patients looking for world-class healthcare closer to home; a sharp increase in the prevalence of lifestyle diseases; a young and growing population; as well as patients’ desire for cultural competency when seeking care [are major contributors],” he tells Construction Week.
The region’s increasing prominence as a healthcare hub can also be accounted for by the design and planning standards implemented during their development.
Dubai Healthcare City recorded an increase in clinical facilities from 124 in 2014 to 132 by mid-2015. Contributing to the rise of healthcare clusters such as Dubai Healthcare City and Bahrain’s Dilmunia are multi-specialty locations, which, according to Knight Frank, offer a combination of medical, commercial, and lifestyle services.
Indeed, the concept of mixed-use healthcare hubs is already generating private-sector interest in the region.
Dubai’s WorldCare Wellness Village is touted to be the world’s largest of its kind, and will be sited on an 8.36ha plot in the healthcare cluster’s Phase 2 expansion area, in partnership with the UAE’s Moafaq Al Gaddah (MAG) Group.
The Village will be anchored by a 9,290 sqm Wellness Center that will focus on prevention and management of diseases, and will also comprise spaces for residential villas and apartments, and rental units for long-term stay.
Similarly, Oman’s Medical City, which is one of its health ministry’s projects under the country’s ninth Five Year Plan (2016-2020), will comprise specialty hospitals consisting up to 1,200 beds, including a general specialties hospital, a paediatric hospital, medical laboratories, and a centre for education, training, and research.
Furthermore, the premises will allocate areas for private-sector developments, such as hospitals and clinics, and commercial projects, such as shopping centres, hotels, and residential compounds.
Colliers’ Ahmed asserts that the private sector’s nod will be crucial to the growth of healthcare real estate in the GCC.
“By 2020, Dubai is [likely] to receive over 500,000 patients as the medical tourism market is expected to grow at a CAGR [compound annual growth rate] of 12%,” he says. “Owing to the large number of tourists expected by 2020, Dubai has planned the construction of three new hospitals and 40 new medical centres. The private sector is expected to be a major stakeholder in this development.
“The 2022 FIFA World Cup in Qatar will also play a major role in attracting medical tourists to [the country] and neighbouring countries in the GCC,” Ahmed continues.
“The month-long event is expected to attract over a million visitors, and due to a shortage of hotel rooms in Qatar, a portion of the visitors will be expected to be hosted in the neighbouring regional states.
“This is expected to have phenomenal impact on the medical tourism industry in the GCC countries.”
Ahmed’s estimations suggest the private sector will be further thrust into the spotlight as public hospitals and medical centres find themselves “increasingly overburdened” by a rising population with lifestyle diseases.
“Due to the rising volume of insurance patients in Dubai and Abu Dhabi, private-sector hospitals now play a major role in diagnosing and preventing lifestyle diseases.”
These private-sector institutions will act as cushioning for GCC governments, which have historically been responsible for the medical bills of their citizens. GCC member states have already implemented drastic cuts to the fuel subsidies they provided their citizens. The UAE and Saudi Arabia are also contemplating taxation on luxury products as they seek to move away from the welfare-state model.
Healthcare investments will also expand as countries, such as Bahrain, look to reduce spending on sending citizens abroad for medical treatment.
According to Arabian Business, Bahrain has already agreed to a new initiative that will see the Kingdom’s health department fly medical experts into the country as part of a cost-saving measure that will trim its current $66m (BHD24.9m) annual spend.
Dr Harrison says he believes the growth of multi-specialty hospitals in the UAE is set to continue, predominantly in response to the surging population growth seen across the Emirates, but also as a part of the country’s ambition to provide specialised care closer to home.
He continues: “To support this population growth, medical facilities need to offer greater levels of efficiency, not just effectiveness, and that means [offering] multiple specialties under one roof. Most regional hospitals have advanced from offering the basics – clinical care and an emergency department – to providing some form of specialisation.
“As the transformation of the regional healthcare sector continues, we expect to see more regional multi-specialty hospitals offering facilities for specific medical needs.”