New research from Savills shows that the UK care home development market is entering a new phase of demand-led growth, as demographic pressures intensify and the need for new beds becomes increasingly acute.
The international real estate advisor has identified a requirement for around 139,000 additional care home beds over the next decade, equivalent to approximately 30% of existing supply. To meet this demand, annual delivery rates would need to more than double from recent levels.
According to Savills, net supply growth has been limited over the past five years, as whilst over 30,000 new care home beds were delivered between 2020 and 2025, this was almost entirely offset by approximately 29,000 beds being decommissioned in the same period.
As a result, the market is entering a period of increasing supply-demand imbalance, with demand growth outpacing net new supply and occupancy now exceeding pre-Covid levels.
The current development pipeline provides a positive near-term base, with around 20,000 beds either under construction or with detailed planning consent. However, Savills says further scale will be required to close the emerging supply gap.
Development remains concentrated in areas where fundamentals are most supportive. Southern England accounted for more than one third of care home completions between 2020 and 2025 and represents around 40% of the current pipeline, demonstrating the stronger viability of schemes in more affluent private-pay markets. However, this also highlights the significant need in lower-fee and more local authority-reliant regions, where demand is high but development economics are more challenging.
Savills says market conditions are becoming more supportive for future development. General building cost inflation has moderated to around 3.8% annually as of early 2026, down from a peak of 15.5% in June 2022, while debt appetite has strengthened and both traditional banks and alternative lenders are increasingly active in the sector. At the same time, private weekly fees have grown faster than inflation over the past five years, supporting operator margins and improving development viability despite a structurally higher cost base. The strength of the UK’s private-pay market has been a key factor in attracting international capital to the sector in recent years.
Tom Atherton, Strategy and Market Intelligence Manager, Savills Operational Capital Markets, says, “The UK care home market is entering a period where quality, rather than simply quantity, will become increasingly important. Residents are entering care later in life, with higher acuity needs and greater expectations around the environment in which they live. This is creating a growing requirement for modern, purpose-built facilities that are capable of delivering high-quality care efficiently and sustainably over the long term.”
Rick Savage, Director, Savills Operational Capital Markets, adds, “Improving financing conditions, moderating cost inflation and resilient operator performance provide a more positive backdrop for development than at any point in the past three years. However, planning delays, contractor constraints and regional viability challenges remain key barriers. A more efficient and consistent planning system, faster progression from consent to construction and greater contractor capacity will be critical to bringing forward new supply, particularly in underserved markets where demographic need is greatest.”
