Medical Centre Development and Refurbishment Finance in 2026

Building a new surgery from the ground up, funding a neighbourhood health centre, or extending and refitting an existing practice all share one funding problem: the money goes out against work that has not been done yet, and it comes back out of rent that is not yet flowing. That is the gap medical centre development finance is built to close. Because a medical centre is an income-led property rather than a trading business, the underwriting weighs the building programme and the future NHS-reimbursed rent side by side, which is why a standard commercial construction loan rarely fits primary care development. This page walks through how a development or refurbishment facility is sized, why the estate need is so acute, how staged drawdowns and rolled-up interest work, how a pre-let lifts leverage, and how the loan is repaid by an exit onto term debt once the centre opens.

Everything below is indicative market commentary for UK GP surgery and primary care property in 2026, not regulated advice. Every figure is a realistic band, set case by case by individual lenders, and should be read as general information only.

What medical centre development and refurbishment finance covers

Medical centre development finance covers three broad jobs. The first is ground-up construction of a new purpose-built medical centre or a larger Neighbourhood Health Centre that houses several services under one roof. The second is substantial refurbishment, extension or reconfiguration of an existing surgery, adding consulting rooms, improving accessibility, or bringing a dated building up to a Care Quality Commission compliant standard. The third is conversion, where another building is changed into primary care use. All three are funded against the cost of the works and the value they create, not against a settled income history, which is what separates development lending from the term debt and acquisition finance covered on sibling guides.

The reason lenders treat this as specialist work is the income that sits behind a finished centre. Where a practice occupies the building under a GMS or PMS contract, the rent is reimbursed by the local Integrated Care Board, so once the centre is let and trading the cash flow is effectively government-backed. That secure, long-dated income is what a development facility is ultimately repaid from, and it is why primary care development is viewed more favourably than most speculative commercial building.

An ageing, undersized estate: why new primary care premises are needed

The structural case for building is hard to overstate. The NHS Confederation reports that around one fifth of GP estates pre-date the NHS itself, and about half of the estate is over 30 years old (NHS Confederation, 2025). A Royal College of General Practitioners survey found that two in five GPs consider their premises unfit for purpose, with the great majority saying they lack enough consulting rooms and space for trainees (Royal College of General Practitioners, 2023). A large share of the existing estate is simply too old, too small, or the wrong shape for modern primary care.

Policy is now pushing capital toward that gap. In 2025 the government announced a GBP 102 million Primary Care Utilisation and Modernisation Fund shared across more than 1,000 GP practices, the first national capital fund for primary care estates since 2020 (NHS England, 2025), sitting alongside the longer-running Estates and Technology Transformation Fund within the wider Primary Care Infrastructure Fund. The NHS 10-Year Plan goes further, promoting Neighbourhood Health Centres that bring primary and community care together, with commentary suggesting around 80% of the capital is expected to come from the private sector through public-private partnership deals (The Lowdown, 2025). Investor appetite is following the policy: UK healthcare real estate investment passed GBP 12 billion in 2025, a record, with primary care around 16% of activity (Savills), and in April 2026 a new venture targeting up to GBP 1 billion for purpose-built primary care premises launched with a seed portfolio of 65 assets (Building Better Healthcare, 2026). For a developer or a practice, that combination of proven need and deep capital is exactly the backdrop that supports funding a scheme.

How development finance works: drawdowns, stages and rolled-up interest

A development facility is not paid out as a single lump sum. It is released in drawdowns against the build programme, usually certified by a monitoring surveyor, so the lender only funds work that has actually been completed on site. That staged release protects both sides and keeps the borrower’s costs honest against the programme.

Interest is commonly rolled up during construction and the early let-up rather than paid monthly, because the centre is not yet producing rent. That rolled-up interest is funded inside the facility itself, which is one reason finance costs form part of the cost base that leverage is measured against. A sensible scheme also carries a contingency inside the cost plan for the unexpected, since planning conditions, ground works and specification changes can move a primary care build. Lenders expect that contingency to be there and will test it before they commit.

How much you can borrow: loan to cost and loan to GDV

Two ratios govern the size of a development facility. Loan to cost measures the loan against total development or refurbishment cost, which means the land or existing building, construction, professional fees, contingency and finance costs. Loan to GDV, or loan to gross development value, measures the loan against what the finished, let centre is expected to be worth on an investment basis. Lenders apply both tests and lend to whichever produces the lower figure.

For UK medical centre schemes in 2026, development and refurbishment finance is typically sized at around 65% to 75% of total cost and up to around 65% to 70% of gross development value. The borrower funds the balance as equity, with mezzanine finance available in some cases to top up the senior loan and reduce the equity cheque, priced at around 10% to 16% a year and sitting behind the senior lender. Those bands are indicative, and the point in the range depends on the scheme, the covenant behind the future rent and the experience of the developer. The valuation that sets the GDV is prepared by a RICS valuer, who capitalises the expected rent at a yield reflecting income security and lease length. That matters because prime primary care yields sat at around 4.5% in 2025, the keenest in the healthcare sector (Savills), and short-dated or older surgery income yields roughly 75 basis points higher than a modern centre on a long lease (Edison Group). A better building on a longer lease is worth more, so it supports a larger loan against the same build cost.

Why a pre-let backed by NHS reimbursement de-risks a scheme

The single biggest lever on a medical centre development is the pre-let. If a GP practice has agreed to take a lease on the finished building, and that rent will be reimbursed by the Integrated Care Board, then the completed centre already has a secure occupier and a government-backed income stream lined up before a brick is laid. That removes most of the letting risk that a lender would otherwise price for.

A pre-let to a practice backed by NHS reimbursement turns a building site into a long, government-backed income stream, and that is what lifts leverage on a medical centre scheme.

A pre-let backed by NHS reimbursement supports leverage at the upper end of the loan to GDV range, because the lender can see the exit income and its source. The reimbursed rent is set by reference to Current Market Rent, assessed by the District Valuer Services or, since the Premises Costs Directions 2024, an approved chartered surveyor, and reviewed roughly every three years. A speculative scheme with no committed occupier is a different proposition and will be geared more cautiously, if it is funded at all. This is why so much modern primary care development is delivered on a pre-let or agreement-for-lease basis rather than built on spec.

Costs, interest rates and who lends

Development finance is priced case by case rather than off a single rate card, because each build carries its own programme, cost plan and letting position. The pricingTable on this site sets out where development funding sits against the rest of the capital stack, from senior term debt at around 5.5% to 7.0% all-in through to bridging at around 0.70% to 1.00% a month. Arrangement fees typically run at around 1% to 2% of the facility, and the all-in cost moves with the Bank of England base rate, held at 3.75% since December 2025 and next reviewed on 30 July 2026 (Bank of England).

Most of this lending sits with specialist healthcare and primary care lenders, the teams that understand NHS reimbursement, notional rent and the District Valuer process, alongside some challenger banks with healthcare appetite. High-street banks tend to be more conservative and focus on modern premises with long, NHS-reimbursed leases and established practices. If you want to understand which route fits your scheme, Medical Centre Property Finance sets out how the market is pricing primary care development in 2026 across its guides on acquisition, refinance and portfolio funding.

Third-party developers, LIFT and Neighbourhood Health Centres

Not every centre is built by the GPs who will occupy it. A large share of the modern estate is delivered by third-party developers who build a surgery and lease it to a practice, funding the premises that partners do not want to own themselves. This model has grown alongside older public-private structures such as the Local Improvement Finance Trust, or LIFT, which funded and operates around 350 community healthcare buildings over 20 to 25 year periods (Community Health Partnerships, 2025). Listed landlords such as Assura and Primary Health Properties own large portfolios of NHS-let centres, which sets the market context for how private capital enters the estate, though here they are named only as estate owners rather than as lenders.

The Neighbourhood Health Centre model in the NHS 10-Year Plan sits squarely in this space. These larger, integrated facilities are expected to draw heavily on private capital through public-private partnership, so development finance, and the pre-let discipline that supports it, is central to whether that pipeline actually gets built. For an experienced developer, a strong pre-let and a credible cost plan are the two things that turn a policy ambition into a funded scheme.

Bridging and the exit onto term debt

Two other funding routes bookend a development. At the front, bridging finance can secure a site or a standing building at speed, at around 0.70% to 1.00% a month for terms up to 12 to 18 months, before the development facility is drawn. That bridge is then repaid out of the development drawdowns, and it is only ever taken on with a clear onward plan.

At the back, every development facility exists to be repaid, and for a medical centre that almost always means an exit onto term debt once the building is complete and let. The finished, income-producing centre is refinanced onto a longer facility, often interest-only where the income is long and NHS-reimbursed, sized on the rent and a debt service cover of around 1.25x to 1.5x. Lenders will look for cover comfortably in that range on the reimbursed rent before they release the term loan. Lining up that exit early, against a realistic rent and lease position, is what stops a good primary care scheme stalling at the finish line, and it is the natural handover to the refinance and term-debt guidance elsewhere in this series.

Talk to us about your scheme

If you are planning a new medical centre, a Neighbourhood Health Centre, or an extension and refurbishment of an existing surgery, it pays to frame the funding before you approach lenders. Set out the cost plan, the expected gross development value, the letting position and the route to a reimbursed rent, and the realistic loan to cost, loan to GDV and exit onto term debt come into focus quickly.

Medical Centre Property Finance is an information resource and is not FCA authorised; nothing here is financial advice or an offer of finance, and you should take professional advice for your own situation.