The UK care home sector is entering a period of renewed construction growth as providers respond to sustained and rising demand driven by demographic change, longer life expectancy and increasingly complex health needs. As of 2025, the UK has 17,088 care homes offering just under 550,000 bed spaces. Construction contract awards have more than doubled in four years, rising from approximately £416 million in 2021 to £1.03 billion in 2025. Bed numbers saw a modest increase in 2024/25, yet overall capacity remains below 2020 levels due to the continued closure and deregistration of smaller, outdated homes.
Why is demand rising?
The population aged 85 and over – the primary users of residential care – is projected to almost triple to nearly five million by 2050. Meeting this need will require an estimated 350,000 additional beds, even before replacing older stock that no longer meets modern regulatory, safety or energy‑efficiency standards. Rising levels of dementia, higher prevalence of multiple long‑term conditions, and ongoing pressures on hospitals are further accelerating the need for high‑quality residential care.
Social and economic shifts are also reshaping the market. Smaller family networks and reduced informal caregiving capacity are increasing reliance on formal care. In 2023, around 37% of residents in England were self‑funders often by selling their property or undertaking equity release. There is also growing demand for higher‑specification, “hotel‑style” homes and specialist homes.
Key Constraints
However, several constraints continue to limit the pace of development. Many existing premises require major refurbishment or replacement. Construction costs for a typical 60–80 bed purpose‑built home now range from £7 million to £12 million. Staffing remains a critical challenge, with high vacancy and turnover rates compounded by restrictions on international recruitment. Planning delays and inconsistent local authority policies for older people’s housing also slow progress.
Outlook
Despite these presses, the adult care home sector is characterised by strong, rising demand that currently outstrips supply, with a growing need for specialised care, which is expected to continue to rise.
The larger chains of care homes are extensive users of external finance to develop their portfolios. and often utilise sale-and-leaseback to fund future development. With the strength of demand combined with the real estate element to the investment, there is no shortage of potential funders.
Barbour ABI forecasts continued growth in construction activity as the industry works to address the UK’s widening care provision gap, though planning and workforce issues are expected to remain key barriers.
