Dental real estate market seen a 'safe space'

As a needs-based sector, the dental real estate market is seen as a safe place for banks to invest their money, according to Joel Mannix, head of dental at specialist business property adviser, Christie & Co.

“We’re seeing strong interest in the sector from both established high street banks and a growing number of challenger banks”, he told Dental Times.

“The dental market has demonstrated resilience, with minimal signs of business distress or insolvency. As a result, it is currently viewed as a relatively low-risk and stable investment environment.”

In the last 12-18 months, though demand for private services is very much still there, the focus is much more on general dentistry

While in the early 2020s there was an emphasis on private dentistry, according to Mannix the pendulum is now swinging back towards the NHS.

“There was a period in 2020-2022 when there was real appetite for high-end private dental implants and orthodontic treatments and a lot of operators followed that,” he said.

“But, in the last 12-18 months, though demand for private services is very much still there, the focus is much more on general dentistry.

“People still need dental services, particularly general dentistry, but they have less disposable income than they did during the pandemic when spending patterns changed, so we are seeing a real drive for NHS providers now.”

This switch towards NHS treatment means that, where real estate is concerned, mixed practices are most in demand as they can flex in line with demand.

Mannix said: “It is good for practices to have the security blanket of the NHS, but if they want to be able to scale their business they might feel they can’t do that with purely NHS income because there is only a set amount they can earn. Therefore, they might want to be able to offer private treatment as well for those who can afford it and that’s where flexibility in terms of the type of property is crucial.

“Most operators are looking for a property with three or more surgeries.

“We’ve yet to see the polyclinic approach in the UK, where there are 10 or 20 surgeries in one location with good parking and a scanner on every floor.

It is good for practices to have the security blanket of the NHS, but if they want to be able to scale their business they might feel they can’t do that with purely NHS income because there is only a set amount they can earn

“This approach could be slow to gain traction as the UK market is currently geared towards quality over quantity, particularly where smaller groups and independents are concerned.”

While rural properties are more difficult to sell compared to urban sites, transactions in these areas are largely led by independent owners rather than larger corporates.

“We have seen some of the bigger corporates selling off less well-performing local assets, and these are catching the attention of smaller, independent buyers,” said Mannix

“There is an argument that if the corporates can’t make it work, how could a single dentist make it work? But, actually, what we’ve seen is the opposite, where a local dentist who is living and breathing that rural area does really well.

“In these rural areas it is harder to recruit, but if you are a dentist who knows the area well then actually it is perfect for you. You’ve bought yourself a job and a future, essentially.

“And that that makes things like recruiting easier because if I’m a dentist or a nurse, I’m probably going to want to go and work with somebody local who I’ve known all my life.

“We’ve observed a significant surge in demand for corporate divestments. Interest levels are exceptionally high, and we anticipate this trend will continue.

“Previously, larger groups were focused on aggressive acquisition strategies, but we’re now seeing a shift toward more strategic, selective growth.

“I think that, moving forward, dentistry will probably remain heavily independent owned, at least in the near future.

“In the last year, 82% of the practices we sold went to independents. In Scotland this figure was even higher at 94%.

Previously, larger groups were focused on aggressive acquisition strategies, but we’re now seeing a shift toward more strategic, selective growth

“We are seeing quite a few dentists looking to retire and they are wanting to sell to like-minded individuals.”

When asked whether buyers favour leasehold or freehold opportunities, Mannix said: “It depends on the buyer.

“If you’re an independent buyer, they would certainly prefer to purchase a freehold and the banks would prefer that if there’s one available as well.

“There are a lot of banks out there that will give 100% lending on the freehold element.

“But, that being said, if there’s a quality practice, they’ll take a leasehold as well.

“Corporates, in contrast, typically don’t want the freehold element, so more often than not what happens is that the dentist who is selling will often retain that as an asset.”