OPPORTUNITIES IN THE LONG-TERM CARE SECTOR I 2nd EDITION

RESEARCH

HEALTHCARE INSAUDI ARABIA October 2019

Since our last healthcare review in May 2018, we have seen the Saudi Arabian government maintain its focus on the healthcare sector in line with the objectives set out in the Vision 2030, and the related interim targets for the year 2020 as defined in the National Transformation Plan (NTP). The healthcare sector retained its position as the third largest area of spending in the 2019 fiscal budget and saw its share of total budget spend trending higher over the past few years.

Privatisation initiatives have seen the commencement of the first Public Private Partnership (PPP)project by Ministry of Health (MoH), which targets radiology and medical imaging services in the Riyadh region. From a regulatory perspective, we have seen the Council of Cooperative Health Insurance (CCHI) increasing its focus on enforcing mandatory health insurance for all companies operating in the private sector. This should translate into a larger pool of beneficiaries and positively impact demand for private healthcare services in the future. Overall, we are witnessing continuous efforts and further initiatives in favour of increased private sector involvement and investments in the healthcare space.

As a sequel to our previous Knight Frank Saudi Arabia sector update, this review places a spotlight on Long-Term Care (LTC) in Saudi Arabia, which has been identified as an area that presents strong demand fundamentals, due to the country’s changing demographic and epidemiological profile. In addition, LTC has also been highlighted within the NTP program as an underserved health service.

Please refer to the important notice at the end of this report.

Government initiatives

The healthcare and social development sector maintained its position as the third largest recipient of government expenditures in the 2019 fiscal budget. This is equivalent to 15.6 percent of the total budget for 2019, as against to 15.4 percent in 2018 and 14.4 percent in 2017.

The budget amount allocated for the sector has grown by 8 percent to reach SAR 172 billion in 2019, as compared to SAR 159 billion in 2018. These positive trends point to the government’s willingness to invest, driving growth and improvement in the sector over the coming years.

Figure 1 shows the rising allocation of the government expenditure in the healthcare and social development sector over the past three years.

Part of the allocated funds for the sector are channeled towards achieving the goals and targets defined in the Saudi Vision 2030 and the 2020 NTP. The government is directing funds towards building robust healthcare infrastructure, by completing construction and installation of equipment in hospitals and primary healthcare centres, in different regions throughout the Kingdom.

Saudi Vision 2030 & the NTP

The MoH has delivered a Healthcare Transformation Strategy Plan as part of the Vision 2030 and the NTP, in which there are three elements that were identified as requiring improvement:

1. Health and quality of citizens’ life2. Quality of service and value for the sector by containing costs3. Outcomes and guiding new investments.

The MoH has identified that certain key healthcare indicators such as the number of healthcare practitioners, healthcare related universities, hospitals, medical centres, life expectancy and infant mortality rate, have witnessed significant improvement over the past years.

The number of hospitals expected to be delivered during 2016 - 2020 stands at 30, which equates to 70 percent of the total number planned for the next five years, with a total capacity of 6,950 beds.

Other indicators which have been identified as areas in need of improvement include a high rate of chronic diseases, early age mortality and unfavorable lifestyle habits.

HEALTHCARE IN SAUDI ARABIA | OPPORTUNITIES IN THE LONG-TERM CARE SECTOR | OCTOBER 2019

“15.6 percent of the 2019 government budget was

allocated to healthcare and social development.”

SHEHZAD JAMAL Partner

FIGURE 1 Saudi Arabia government expenditure on healthcare and social development

2017 (actual)

SAR

(in b

illion

)

% o

f tot

al bu

dget

2018 (estimate) 2019 (budget)

Source: Ministry of Finance

14.4%

15.4%

15.6%

15.8%

15.6%

15.2%

15.0%

15.4%

14.8%

14.4%

14.2%

14.6%

180

200

160

140

120

100

80

60

40

20

0

Allocation in SAR bn % of total budget

Mandatory health insurance

• Saudi Arabia is increasing regulatory supervision regarding the adoption of the mandatory unified health insurance in the country, with the CCHI recently unveiling new procedures aimed at increasing the supervision of private sector companies.

• The gradual rollout of mandatory health insurance in Saudi Arabia and the enforcement of the law are expected to translate into an increase in the number of beneficiaries and a wider utilisation of medical services at private healthcare facilities.

• As of August 2019, there were 26 insurance companies operating in Saudi Arabia and the number of insured persons in the Kingdom stood at 11,075,993. (Figure 2)

FIGURE 2 Total insured population in Saudi Arabia

Privatisation and PPP schemes

The MoH is planning a series of PPP projects ranging from primary healthcare facilities to medical cities. The MoH recently embarked on its first PPP project (inviting local and international service providers) which targets radiology and medical imaging services covering several hospitals in the Greater Riyadh region. Once delivered the project is expected to improve medical imaging services in terms of wait and turn-around times as well as reliability of imaging for more appropriate treatment. This collaboration will improve the availability of highly specialised services such as Positron Emission Tomography scan and Nuclear Medicine in Riyadh. This first PPP project reflects the government’s commitment towards achieving the ambitious privatisation plan, as updating and expanding radiology services across the country with the private sector is a key target in relation to the healthcare sector.

“The overall number of insured persons under the mandatory

health insurance is set to increase in 2019 and over the

coming years as the CCHI enforces the implementation of

the law.”

RAYA MAJDALANI Research Manager

Source: CCHI

Total Dependent Non Saudis1,739,438

Total Primary Non Saudis

6,023,327

Total Primary Saudis

1,275,437

Total Beneficiaries11,075,993

Total Dependent Saudis2,037,791

HEALTHCARE IN SAUDI ARABIA | OPPORTUNITIES IN THE LONG-TERM CARE SECTOR | OCTOBER 2019

“Supply constraints within the long-term care segment are

also recognised by Saudi Arabia’s government. To put

this into perspective, the Kingdom has 1 rehabilitation bed per 130,000 population

indicating a 10x supply required to be in line with

developed nations such as UK and USA.”

DR. GIREESH KUMAR Senior Manager

Long-term care / rehabilitation

Our healthcare research has identified LTC (including rehabilitation) as a sector with strong demand fundamentals, which is set to expand especially with the changing population dynamics.

These segments have also been identified by the government in the Health Transformation Strategy which states: “There is inadequate capacity in extended care services such as rehabilitation, long-term care and home care.” In addition, this segment is also on the PPP list, under the NTP programme.

Defining long-term care

LTC is a collection of services which assist both medical and non-medical conditions of patients with chronic illness or disabilities.

Rehabilitation is a key element of LTC care and can be classified into physical and mental rehabilitation.

Figure 3 identifies different health conditions and the required health facilities to cater to these conditions.

Patients that fall under the LTC category do not usually require an acute care setting, instead they require limited healthcare services that are specific to their condition. However, due to lack of such facilities, LTC patients occupying hospital beds create bottlenecks within the general health system.

Statistical data on LTC is negligible, as it has historically been a niche segment and served by only a handful of healthcare service providers (mainly government bodies).

FIGURE 3 Continuum of care

Source: Knight Frank Research

Type of care

Home healthcareAcute healthcare hospital(first point of contact)

Facility type LTC / Rehabilitation hospital

Acute event: stroke, cardiac arrests, road traffic accidents

Low risk patients requiring support in day to day activities

Post-acute care and physical rehabilitation which cannot be provided as an outpatient service

HEALTHCARE IN SAUDI ARABIA | OPPORTUNITIES IN THE LONG-TERM CARE SECTOR | OCTOBER 2019

FIGURE 4 Long term care – rehabilitation bed density

Key points that support investment within the LTC sector in Saudi Arabia are presented below:

• Due to scarcity of LTC infrastructure, the government has to send patients abroad for treatment, which is a very costly proposition. Taking rehabilitation as an example, 36,000 accident patients needed to be cared for in 2015, with only 236 beds dedicated for LTC in MoH hospitals.

• Figure 4 presents LTC (including health rehabilitation) bed density by developed nations in comparison to Saudi Arabia.

• Statistics show that 13.9 percent of the MoH active beds were blocked by LTC patients in 2017, compared to 7 percent in 2016. Figure 5 presents the breakdown of this data for Saudi Arabia by area.

• In addition, our primary research (based on interviews with stakeholders) indicates that approximately 10 percent of acute care beds within other government and private sectors are utilised by LTC patients. This translates to around 9,000 beds, including MoH beds, that are blocked by such patients representing unmet

demand. According to leading healthcare operators the unmet demand is higher and their estimate is in the range of 12,000 to 15,000 beds.

• To help investment, the government is seeking to introduce approximately 2,000 beds for extended care and rehabilitation under the PPP mechanism by 2022, with a guaranteed offtake agreement.

• Private sector LTC service providers are operating at optimal utilisation.

• In addition to just numeric supply constrains there are certain specialist services within this sphere that are non-existent (or minimal) which can be introduced such as cardiopulmonary rehabilitation, neuro rehabilitation etc.

Source: Ministry of Health

FIGURE 5 Percentage of active beds blocked by LTC patients in MoH hospitals

Riya

dh Taif

Jedd

ah

Qas

eem

Med

inah

Mak

kah

Al B

ahah

Jaza

n

Al A

hsa

Asee

r

Tabo

uk

Ha’il

Al J

ouf

Bish

ah

Najra

n

Hafr

Al-B

atee

n

Qur

raya

t

Qun

fuda

h

Saud

i Ara

bia

North

ern

Prov

ince

East

ern

Prov

ince

Source: Ministry of Health

2016 2017

0%

5%

10%

15%

20%

25%

30%

35%

Country 1 bed per population

Germany 1,000

USA

UK 16,000

Turkey

10,000

KSA

30,000

130,000

HEALTHCARE IN SAUDI ARABIA | OPPORTUNITIES IN THE LONG-TERM CARE SECTOR | OCTOBER 2019

Conclusion: Value perspective

It is evident that there is an unmet demand in the LTC sector. Excluding the additional supply of 2,000 beds under the PPP scheme, the bare minimum requirement as per our research is at least 7,000 beds and, as per stakeholder insights, demand stands between 10,000 and 13,000 beds, as presented in Figure 6.

Demand growth rates will continue to accelerate as the over 60s population is expected to increase by 3 times between 2018 and 2035 (Figure 7). This would result in demand for additional specialisations within the LTC sector due to the burden of chronic diseases, which leads to degenerative and debilitating illnesses in the geriatric segment.

Market stakeholders views on LTC sector

“Gaps still exist for the provision of long-term care facilities in Saudi Arabia, and will continue until the required number of beds are met. The success of NMC’s Chronic Care Specialist Medical Center Hospital in Jeddah, is evidence of requirement for quality providers of long-term care in the Kingdom. NMC intends to continue to source ways in which to fill the gap, particularly through brownfield and greenfield expansion projects in areas where the most need exists.” Michael Davis, COO of NMC Healthcare

“The number of hospital beds utilised as long-term care in the Ministry of Health was reported to be around 4,500 according to 2017 statistics. This number is expected to increase due to the changes in age group as well as the increased number of reported traffic accidents that result in disabled patients. Other non-MoH healthcare providers utilise around 1,200 beds of long-term care.The 65+ Saudi population was estimated to be 900,000 in 2018 and this number will increase to 1.4 million in 2022, and to 2.5 million by 2030. As per the international benchmark of LTC beds, Saudi Arabia is heading to a gap in excess of 12,000 beds, based on the currently available LTC beds.” Dr. Turki M. Alanazi, CEO of Family Care Hospital, Member of the National Health Committee - CSC

2,000

0

0

4,000

6,000

8,000

10,000

12,000

14,000

16,000

FIGURE 6 Estimated demand for LTC beds

Based on beds blocked

2,000

2,000

2,000

7,000

Low range of experts estimate High range of experts estimate

10,000 13,000

Beds demanded PPP-supply

Source: Knight Frank Research

20-29 30-39

20-39 years 40-59 years 60+ years

40-49 50-59 60-69 70-79 80+

1.0x 1.4x 3.0x

1,000

Popu

latio

n, th

ousa

nds

Age groups

2,000

3,000

4,000

5,000

6,000

7,000

1.1x

0-19 years

0-9 10-19

FIGURE 7 Shift in KSA population age groups by 2035

Source: United Nations

33.6 m

41.3 m

2035

2018

HEALTHCARE IN SAUDI ARABIA | OPPORTUNITIES IN THE LONG-TERM CARE SECTOR | OCTOBER 2019

5,000

Knight Frank Research Reports are available at KnightFrank.com/Research

Regional offices in:

Botswana • Kenya • Malawi • Nigeria • Rwanda • Saudi Arabia • South Africa Tanzania • UAE • Uganda • Zambia • Zimbabwe

Important Notice© Knight Frank 2019 - This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank to the form and content within which it appears.

Knight Frank Middle East Limited (Saudi Arabia Branch) is a foreign branch registered in Saudi Arabia with registration number 1010432042. Our registered office is located on the 1st floor, Building WH01, Al Raidah Digital City, Riyadh, Kingdom of Saudi Arabia.

KINGDOM OF SAUDI ARABIAStefan Burch, MRICSGeneral Manager & Partner+966 53 0893 297stefan.burch@me.knightfrank.com

Saud SulaymaniPartner, Valuation & Advisory+966 55 8838 883saud.sulaymani@me.knightfrank.com HEALTHCARE & EDUCATION Shehzad Jamal Partner +971 56 4101 298 shehzad.jamal@me.knightfrank.com Dr. Gireesh KumarSenior Manager+971 56 4845 490gireesh.kumar@me.knightfrank.com

Maria KuzminaSenior Consultant+971 50 6686 028maria.kuzmina@me.knightfrank.com

RESEARCH

Raya MajdalaniResearch Manager+971 56 4206 735raya.majdalani@me.knightfrank.com VALUATION & ADVISORY SERVICESStephen Flanagan, MRICSPartner+971 50 8133 402stephen.flanagan@me.knightfrank.com CAPITAL MARKETS / INVESTMENTJoseph Morris, MRICSPartner+971 50 5036 351joseph.morris@me.knightfrank.com MEDIA & MARKETINGNicola MiltonHead of Middle East Marketing+971 56 6116 368nicola.milton@me.knightfrank.com

RECENT MARKET-LEADING RESEARCH PUBLICATIONS

The Riyadh Metro

The implementation of the Riyadh Metro falls in line with the rapid expansion of population and urbanisation which calls for the establishment of mass transportation systems in the capital city

The opening of the Riyadh Metro is set to help drive real estate demand across the capital as well as reviving neighbourhoods which have historically been classed as secondary locations

Whilst it is too early to quantify the effect on real estate values, an analysis of international benchmarks shows that mass transit systems have the potential to be a strong driver for growth as a result of improved connectivity

Key findings

“The Riyadh Metro is set to have a marked effect in relation to real estate dynamics and the ability to spur meaningful urban regeneration.”

RAYA MAJDALANI Research Manager

IntroductionFollowing Saudi Arabia’s rapid population growth, which has increased from 27.6 million in 2010 to 32.6 million, urban centres across the Kingdom have seen corresponding expansion. The United Nations currently estimates that 84% of the Kingdom’s population reside in urban centres, up from 45% five decades earlier - in numerical terms this equates to 27.3 million urban residents in 2018 compared to 2.4 million in 1968. With this rate of expansion and urbanisation comes the need for cities to adapt to changing market dynamics and occupier demands. In the short to medium term, we believe that urban regeneration will need to play an increasingly important role across Saudi Arabia.

Recently introduced strategic reforms aimed at creating a favourable environment for investment and strengthening the non-oil sector have placed a focus on real estate which is forecast to double its contribution to economic output throughout the period to 2030.

Moreover the implementation of various urban regeneration initiatives including mixed use communities and large scale infrastructure projects are expected to act as catalysts for the real estate market.

The Riyadh Metro is one of the key infrastructure projects that is being implemented and which is set to dramatically alter the dynamics of both residential and commercial real estate markets when delivered. Whilst it is too early to quantify the effect on capital values, land values and rental rates, an analysis of international benchmarks shows that mass transit systems have the potential to be a strong driver for growth as a result of improved connectivity.

RESEARCH

THE RIYADH METRO

Source: Knight Frank Research, Riyadh Metro website

FIGURE 1 Riyadh Metro

QASR AL HOKM

WESTERN

KING ABDULLAH FINANCIAL DISTRICT (KAFD)

AL OLAYA

KING KHALID INTERNATIONAL AIRPORT (RUH)

AL HAMRA

AL MANAR

AL MISHAL

AS SULAY

AN NASIM ASH SHARQI

KHASHM AL AN

MURABBA PALACE

NATIONAL MUSEUM

FAISALIAH TOWER

KING FAISAL HOSPITAL

KINGDOM CENTRE TOWER

KING SAUD UNIVERSITY

Blue Line: Olaya - Batha’a, 38 km distance

Red Line: King Abdullah Road, 25.3 km distance

Orange Line: Al Madina Al Monawara - Prince Saad bin Abdual Rahman Al Awal road, 40.7 km distance

Yellow Line: King Khaled International Airport Road, 29.6 km distance

Green Line: King Abdul Aziz Road, 12.9 km distance

Purple Line: Abdul Rahman bin Aouf road - Sheikh Hassan bin Hussain bin Ali road, 30 km distance

Key stations

Please refer to the important notice at the end of this report.

THE IMPACT OF NEW INFRASTRUCTURE ON REAL ESTATE VALUES | JUNE 2018

Saudi Arabia Office Market Review 2018

COMMERCIAL RESEARCH

SAUDI ARABIA OFFICE MARKET REVIEW 2018

In Saudi Arabia, market wide rents and occupancy levels have been under pressure since 2016, with the trend continuing into 2018 amid increasing levels of supply and subdued occupier demand.

Prime office schemes have been outperforming the market as a result of a historic lack of quality stock. A major headwind is that a large portion of upcoming supply falls within this category, which could put pressure on performance in this segment.

Although there was an improvement in business sentiment in 2018, on the back of higher oil prices, this has yet to result in an increase in demand for office accommodation across major cities.

Long term demand drivers include: an acceleration of growth in the non-oil sector, an increasingly attractive business environment for global occupiers and the implementation of various urban regeneration initiatives.

Key findings Whilst there have been a number of notable commercial office transactions throughout 2018, as key occupiers both from the public and private sector look to expand or move to upgraded premises, the market continues to be dominated by a lack of Grade A stock and a large supply pipeline.

In terms of performance, market wide rents and occupancy levels have been under pressure since 2016, with the trend continuing into 2018 amid increasing levels of supply and subdued occupier demand. Key prime schemes continued to perform better than the market average as a result of a lack of high quality stock. However as new schemes are released into the market this trend is unlikely to persist over the long term.

Against the backdrop of a highly elastic supply dynamic, we see rents for Grade B assets softening further in the short term where buildings that suffer from poor accessibility and parking arrangements will struggle for occupancy.

Although we have seen an improvement in business sentiment in 2018, we believe that any increase in demand will remain subdued in the short term, with rents and occupancy likely to remain under pressure as increased demand will be met with new supply. Vacancy rates can therefore

be expected to rise placing downward pressure on rents. In this context, we expect landlords to continue offering incentives in order to maintain occupancy levels amid an increasingly competitive market.

Longer term, we see demand for office space picking up from current levels as economic reforms under the National Transformation Plan (NTP) and Vision 2030 start feeding through the wider economy, translating into an acceleration of growth in the non-oil private sector.

Moreover, the implementation of various urban regeneration initiatives including mixed use communities and large scale infrastructure projects, is expected to act as a catalyst for the real estate market.

Furthermore, it is expected that the planned wave of privatisation will boost investment and foster growth in the business environment creating favourable conditions for the office sector.

Source: Macrobond

140

120

100

80

60

40

20

0

Source: Knight Frank Research

Double the real estate contribution to GDP from 5% to reach 10% by 2020

Increase the real estate sector growth to 7% per year up from 4%

Increase the private sector contribution from 40% to 65% of GDP with particular focus on the real estate sector

x2

FIGURE 1 Selected NTP targets in relation with the real estate sector

FIGURE 2 Brent Crude Oil, Spot (in USD)

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Please refer to the important notice at the end of this report.

“The implementation of various urban regeneration programs, mixed use communities, and large scale infrastructure projects is expected to act as a catalyst for the real estate market in the Kingdom.”

SAUD SULAYMANI Partner, Saudi Arabia

Urban Futures - Saudi Arabia edition 1

1

2019

U R B A N F U T U R E SAFFORDABLE LIVING SOLUTIONS FOR ECONOMIC LONGEVIT Y

SAUDI ARABIA EDITION — 12019

TH

E W

EA

LTH

RE

PO

RT

2019

The global perspective on prime property and investment

Saudi Arabia Residential Market Review 2019

RESIDENTIAL RESEARCH

SAUDI ARABIA RESIDENTIAL MARKET REVIEW 2019

IntroductionThe residential market continued to soften in 2018 as highlighted by lower levels of transactions and a correction in rental and sales prices across the major cities in Saudi Arabia. In the first half of 2019, prices appear to have remained under pressure while transactions volumes have picked up significantly across the key cities, indicating that the market may be heading towards the bottom of its cycle.

The trend towards a weaker residential market was initially triggered by the economic slowdown that started to be felt in 2016; so far, the sector has failed to recover. A combination of factors has prolonged the downturn namely the departure of expatriates from the Kingdom, continuing affordability challenges and the lack of stock targeted at lower to middle tier buyers.

The main target of the government is to increase Saudi home ownership to 52% by 2020 and 70% by 2030. Various initiatives are underway to get Saudi nationals on the housing property ladder. The Sakani affordable housing program, which is now in its third year, and the various regulatory efforts to expand the mortgage market are a case in point.

Despite current headwinds, drivers for the market appear to be positive for the longer term. The government focus on the real estate sector as part of the diversification process of the economy is seen as a catalyst for a more active residential market over the coming years. Moreover, the various urban regeneration initiatives, which are underway, are expected to play a vital role in responding to changing demand dynamics.

In the first half of 2019, prices appear to have remained under pressure while transaction volumes have picked up significantly across the key cities, indicating that the market may be heading towards the bottom of its cycle.

With a growing urban population and a mismatch in the provision of housing stock to low to middle tier buyers, housing affordability in Saudi Arabia is a rising challenge. The Sakani affordable housing scheme and the efforts to expand the mortgage market are expected to alleviate pressures in this area.

Despite challenging market conditions, we remain encouraged by the various government initiatives aimed at boosting Saudi home ownership and by the government focus on the real estate sector as part of the economic diversification process.

Key findings

FIGURE 1 Key government targets in relation to the real estate sector

Increase real estate sector growth to 7% per year by 2020

Increase Saudi home ownership from 47% to 52% by 2020 and 70% by 2030

Increase the size of the mortgage market to SAR 500 billion by 2020

Double the real estate contribution to GDP to reach 10% by 2020

Source: Knight Frank Research, NTP, Ministry of Housing

FIGURE 2 Government spending

FIGURE 3 Government revenues

SAR 930 bn2017

SAR 1,030 bn2018

SAR 1,120 bn2019F

SAR 692 bn2017

SAR 895 bn2018

SAR 893 bn2019F

Source: Knight Frank Research, IMF economic outlook database April 2019 edition, SAMA

Source: Knight Frank Research, IMF economic outlook database April 2019 edition, SAMA

“The residential market remains under pressure as the rising affordability challenge and the lack of suitable supply for middle and lower tier buyers continue to weigh on the sector. In H1 2019 we have seen a significant pick up in transaction volumes across key cities which indicates that the market may be heading towards the bottom of its cycle.”

RAYA MAJDALANI Research Manager

Please refer to the important noticeat the end of this report

Makkah Hospitality2018

Saudi Arabia Real Estate Market Review& Forecast 2019

Healthcare in SaudiArabia 2018

The Wealth Report 2019

Active Capital 2019

Research Highlights knightfrank.com/activecapital

T H E

R E P O R T

2 0 1 9

RESEARCH

SAUDI ARABIAMARKET REVIEW & FORECAST 2019

THE ANNUAL REVIEW AND FORECAST OF THE SAUDI ARABIAN REAL ESTATE MARKET

Demand for healthcare in Saudi Arabia is set to continue growing triggered by a demographic shift and an increase in health insurance coverage.

Forecasted demand gap due to population growth and facilities requirements, create a business case for the development of additional facilities in Saudi Arabia.

In the context of growing healthcare demand, government initiatives call for a greater participation of the private sector in healthcare as highlighted in the National Transformation Plan (NTP) and the recent privatisation plan.

Key findings

RESEARCH

HEALTHCARE IN SAUDI ARABIA OPPORTUNITIES IN THE SECTOR | MAY 2018

Investing in alternative real estate asset classes such as healthcare is a growing trend among global and local investors seeking diversification benefits as well as long term stability given the defensive nature of the underlying income stream. In Saudi Arabia, rising demand for healthcare and government initiatives favouring an increased participation from the private sector look set to drive expansion in the sector and open new doors for investors.

FIGURE 1 Demographic Shift (2017-2035 Multipliers)

Please refer to the important notice at the end of this report.

OpportunitiesTaking a closer look at the Saudi Arabian healthcare market, we note that the prevailing picture is one that offers a number of opportunities to existing operators / investors and new entrants, hence the possibility to unlock a significant growth potential by fulfilling existing and future gaps.

PopulationSaudi Arabia has a young population with approximately 70% below the age of 40 years, and health services have been planned based on this demographic profile. If we fast-forward to 2035, the population would still be considered young, despite a significant change in healthcare demand dynamics:

• Population between the ages of 40 and 59 will increase by 1.5 times in Saudi Arabia.

• Population over the age of 60 is forecast to increase by more than 3 times in Saudi Arabia. (Figure 1)

With 44% of the population over the age of 40 and 14% over the age of 60 in 2035, requirements for healthcare services will broaden. With such a population mix there will be increased demand for health services such as:

• Care related to lifestyle and non-communicable diseases; as these diseases normally start developing when people reach their 40s, such as cardiovascular, diabetes, obesity and rheumatoid arthritis.

• Geriatric related care, rehabilitation, home healthcare and specialised healthcare services as immunity and activity beyond the age of 60 are generally low.

• Proactive healthcare, antiaging services and regenerative medicine, as generation X, Y and Z are relatively more health aware and conscious of their appearances.

Source: Oxford Economics 0-19 years 20-39 years 40-59 years 60+ years

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0Saudi Arabia Riyadh Jeddah Makkah Madinah

“Over the next decade, population dynamics are forecast to shift with a significant increase in the population over 40. This indicates an expected increase in the burden of lifestyle diseases and the associated co-morbidities which would trigger an upsurge in demand for highly specialised medical and surgical care in the Kingdom.”

DR. GIREESH KUMAR Senior Manager, Healthcare