NHS Property Giant Halts Surgery Development Due To Government Rent Dispute

A significant NHS property owner has suspended the construction of new medical facilities across the UK until governmental authorities agree to increase rental rates to economically sustainable levels. Primary Health Properties (PHP), which manages a portfolio exceeding 500 medical centres throughout the UK and Ireland, will complete only two remaining projects in West Sussex and London before implementing a complete development freeze.

The property specialist is seeking crucial negotiations with NHS officials and government representatives regarding rental rates, which the company believes require substantial adjustments of 20 to 30 per cent in certain locations to address inflationary pressures since the COVID-19 pandemic.

Mark Davies, PHP’s chief executive, highlighted the mounting challenges: “The past three to four years have witnessed inflation ranging between 20 to 25 per cent, whilst our rental growth has remained constrained at 3 per cent annually. This disparity must be addressed to enable the development of modern primary care facilities, which the government desperately requires.”

The organisation’s property empire spans 516 medical establishments, including surgeries, dental practices, and health centres, stretching from Ramsgate to the Scottish Highlands and across to Cork. Nearly 90 per cent of PHP’s rental income stems from UK and Irish governmental sources.

The company’s financial performance remains robust, with net rental income climbing 2.9 per cent to £153.6 million in 2024, compared to £149.3 million in the previous year. Lease renewals achieved average increases of 6 per cent compared to their previous five-year terms.

Despite property portfolio valuations declining by £38.4 million to £2.75 billion, PHP doubled its pre-tax profit to £47 million in 2024. The company maintained its impressive track record of dividend growth, distributing 6.9 pence per share, marking its 29th consecutive year of increased payouts.

The Irish healthcare model, where rents are indexed to inflation, represents an appealing alternative for PHP, with Davies expressing enthusiasm for potential Labour reforms that might align UK practices with the Irish system. This approach could potentially resolve the current development impasse and ensure continued investment in vital healthcare infrastructure.