Are GP surgeries facing the perfect property storm?

Demand for GP services has risen exponentially over the past two years, driven not only by the pandemic but also by an increasing – and increasingly ageing – population which, it is predicted, will result in one in four people being aged 65 or older by 2050.

Yet, according to our property experts, neither the GP workforce nor its property infrastructure is growing fast enough to meet this rising demand, creating the perfect property storm.

With just 35,273 registered GPs in 2020 and patient numbers per practice 22% higher than in 2015, the demands placed on GPs and their ageing premises have never been higher, resulting not only in GP exhaustion and fatigue, but many leaving the profession and surgeries closing their doors.

Indeed, a recent survey by the British Medical Association (BMA) (April 2021),revealed that BMA members (60%) have been experiencing ‘higher than normal’ levels of exhaustion or fatigue.

Not only this, in 2020 alone, 546 older, more experienced GP partners left the profession altogether, with around 100 GP surgeries shutting their doors. Since NHS England became operational in April 2013, one in six GP practices have either closed or merged to create larger medical practices, according to GPonline.

Many of the surgeries that remain, are either operating in obsolete purpose-built buildings or unsuitable converted premises which, eight out of ten GPs state, lack space and are not fit to meet future needs.

This is particularly true, considering how delivery of NHS healthcare has evolved over the past two years, as Dr Dan Bunstone (pictured below), Chief Medical Officer at PushDoctor, the UK’s first platform to offer video consultations online and via smartphone, explains:

“The pandemic has shown us how digital technology can help, working alongside face-to-face care to make systems more sustainable, efficient and joined-up, with clear benefits for clinicians and patients alike. However, whilst innovations are being made in the delivery of GP services, the infrastructure to support this, including the buildings from which many GP surgeries operate, isn’t coming quickly enough.”

Whilst many GP surgeries are now returning to in-person appointments, a proportion of online or telephone consultations will remain, requiring more space for online consultations and better technological infrastructure to support this.

Dr Bunstone continues: “Even though, as a completely digital GP service, 100% of our consultations being online or over the phone, we still require a property presence to bring our clinical teams together to benefit from the social interaction and peer-to-peer learning that was lost throughout the pandemic.”

Property demand outstrips supply

Demand for new clinical premises continues to rise, as both NHS and private healthcare providers seek increasingly innovative ways to deliver on their future property need.

Chartered Surveyor, Jennifer Nicol who is based in our London office, explains: “Whilst there is strong demand for medical and clinical space from surgeries with older or converted premises, there is currently a lack of suitable supply in the market to answer this. Together with funding challenges, this means that many NHS GP surgeries are struggling to operate from premises that are fit for the future.”

Speaking of the challenges that many surgeries face, Dr Jyotsna Magapu, GP partner at The Chorley Surgery, commented: “In the past, partners would buy into the property and take on part of the mortgage, with rent reimbursement from NHS England covering repayments. Problems tend to arise with outgoing or incoming partners when costs need to be moved or partners bought out.

“Maintenance is also a big consideration and partners generally have to find their own extension. If there is no room to grow, many are left stuck in premises that lack that potential, and services have to be farmed out to other practices as a result.”

Many are turning to office or retail buildings which can now be converted for medical use without requiring a change of planning use, following recent changes to permitted development rights.

Smaller GP practices and dental practices are exploring this route, meanwhile larger practice practices offering more comprehensive health hubs, or which incorporate complementary services, such as integrated pharmacies, dental services and minor surgical services, look to larger redundant premises, such as former department stores.

This is already happening in some areas, including Poole where the former Beales department store at the town’s Dolphin Centre, is set to convert its top floor to create a clinical space for tests and screening.

What are the challenges?

Whilst an exciting opportunity for the healthcare sector, as GP practices benefit from the continued demise of the High Street which has been exacerbated by the pandemic, it doesn’t come without its challenges, as Nicol explains:

“Conversion of high street office or retail units for medical use can entail certain planning challenges, including the potential need for prior approval as well as building infrastructure and services, and competition from residential developers who can deliver higher return on investment.

Whether or not GP surgeries will be able to compete effectively in the market to take advantage of these opportunities, remains to be seen.

“In most instances, residential use will deliver a higher land value and more attractive yields for developers, so acquisitions for medical use can often be outbid by residential developers and alternative uses,” added Nicol.

The property challenges for GPs don’t end there, as access to Government funding to support property costs continues to be a complicated issue to navigate.

100% NHS-funded premises improvement grants are now available following GP contract updates in 2020/2021, and it will be interesting to see what the recent 1.25% tax increase announced for health and social care will deliver in additional funding.

The level of funding for which surgeries are eligible depends on a multitude of factors, and contributions will need to be discussed with the NHS during the approvals process, which is slowing the delivery of modern surgery facilities.

Nicol continued: “Practice owners can apply for NHS funding to facilitate improvement and development proposals to their existing premises through Government schemes such as grants or abated Notional Rents, or self-fund proposals through bank loans. However, for younger doctors or those approaching retirement, the additional financial liability this entails, proves much less desirable.”

This is, without doubt, a sector which is experiencing a great deal of change and innovation, both in healthcare delivery and property terms, and GPs need support if they are to avoid the property pitfalls.

What should GP surgeries consider?

A good place for surgeries to start is to understand the value of their existing premises.

Getting a professional ‘Red Book’ valuation from a Chartered Surveyor on the Market Value of the premises will help you to make an informed decision about the best route to meet your property needs.

For some, this might even include selling their and leasing back their premises, to release much-needed capital for refurbishment works and relinquish property liability.

“Sale and leasebacks can represent an invaluable opportunity for some GP partners to relieve themselves of a significant property burden, whilst enabling the astute investor to enter a relatively low-risk market or diversify their portfolios in a market backed, as it is, by the Government’s notional rent reimbursement scheme,” explains Richard Dawtrey, investment specialist based in our London team.

Larger modern surgeries achieve the strongest demand and yield profiles with more limited demand for smaller, older stock, which tends to be considered for repurposing because of access and functionality issues, and the challenge of integrating new technology infrastructure.

Concluding, Nicol said: “With the right advice, GPs can absolutely achieve their property aims and navigate through the choppy waters of property decision-making process, to deliver medical practices fit for the future.”