There’s no place like Home Counties!
As with the domestic property market, the value of and demand for a dental practice has a lot to do with its location. At the moment, it’s the Home Counties that is one of the major hotspots for dental practice demand. Scott Gidman considers why
The popular Channel 4 property programme was given the name Location, Location, Location for a very good reason; when you buy a home, it must be in a location that’s right for you. If it’s not, Kirstie or Phil would be the first to point out that no matter how lovely the house is, it won’t be the right investment for you.
This fundamental law of the property market applies just as strongly to the purchase of a dental practice. Before visiting available practices most buyers will carry out research, including an assessment of the local demographics, average disposable income, future property development in the area and other key factors that will indicate the viability of the location for the type of practice they want to develop. This research provides insight into the type of patients they will be able to attract and also the future growth prospects for the new owner’s business.
Location is key
Over the past few years, we have noticed a trend developing that is now having a significant impact on the dental acquisitions market. London has always been a hotspot, where demand for practices often exceeds supply, and competition for practices that do come to market is fierce. Demand has gradually spread outwards from the capital towards the M25 where housing is slightly more affordable and costs are lower.
More recently this ripple effect appears to have expanded beyond the M25 into the Home Counties, Oxfordshire, Kent, Sussex and even down the A3 corridor into Hampshire. Now, in the Home Counties, we regularly have 20-25 interested buyers for every practice, which is double the level of interest we have seen in previous years. This demand is driving prices up and increasing the speed of sale of those practices that do come to market.
It’s a general rule of thumb that wherever there are large populations, such as on the outskirts of London or in the M25 corridor, there will always be a need for essential services like dental practices. And, as the London commuter belt widens, the demand for dental practices increases in the surrounding counties.
Recruitment of dental professionals also has an effect on practice values. It’s an obvious comment but without dentists, hygienists, nurses etc it’s impossible to either fulfil NHS contracts or drive private revenue. With the shortage of professionals, the availability of staff is an increasingly important factor. Those areas of high population not only feed the patient base but also provide a ready supply of staff to run the practice – it’s two sides of the same coin.
A shift in demand
These business demand hotspots are creating what we call ‘investment zones’, which are in turn fuelling demand. There are many small groups of investors who are looking in specific areas, like the Home Counties, for practices that can be part of a ‘buy and build’ scenario. These investors have identified areas with high populations, reasonable levels of disposable income and better recruitment opportunities, because the return on investment for practices in these areas is likely to be strong.
Of course, practices are also bought by dentists who are owner/occupiers and are attracted to the Home Counties as a lifestyle choice. Rather than building up the practice from scratch, as was more common 20 years ago, many are attracted to an already established practice, which they can take over and develop, usually by increasing private revenue.
Both these buyer types are willing to purchase practices that require investment to modernise or adapt, because the location and potential for growth are so positive. The potential for specialist incomes is also high in these more affluent hotspots, where there is plenty of business for practices offering cosmetic, aesthetic, orthodontics and implant treatment.
The popular Channel 4 property programme was given the name Location, Location, Location for a very good reason; when you buy a home, it must be in a location that’s right for you
All of these factors have conspired to create a perfect storm in demand for practices in the Home Counties. Potential buyers looking to invest in these areas know that whilst most things can be changed, the location cannot. If you wish to succeed, enlist the help of Mediestates, one of the UK’s largest specialist dental practice brokers. At any one time, we are marketing over 130 dental practices and our specialist dental property experts can help find the perfect practice for you, before it’s snapped up by somebody else.
Posted by: Scott Gidman on 02 Aug 2018