“We are starting to see MOB's rents rise. Demand is increasing more than the available supply,” explains Johnson. “Some of the existing stock is also getting older and so tenants and physicians are wanting newer spaces and those higher rents are justifying new constructions. The market is being driven by solid and increasing demand.”

Retail and Healthcare

The retailization of healthcare has been an emerging trend and will continue as the U.S. has been over-retailed—meaning not enough retail occupancy to fill all the vacant retail spaces, especially the older facilities.

“These vacant retail spaces are attractive because they are flexible, well-located, have great visibility and lots of parking,” explains Johnson. “Suburban shopping malls are often transformed into healthcare spaces.”

A Major Challenge

One major challenge in healthcare is the shift towards outpatient care where care is not being delivered in a concentrated hospital setting but near to where people reside. A lot of the health systems do not necessarily know how to provide healthcare to the patient in the outpatient setting, Johnson says.

“One has to be careful to not build where there is no demand. Poor location deliveries can be very costly. For example, one company built a collection of microhospitals and couldn't determine why they were doing so poor. Location analytics cannot guarantee success but it can take a lot of the risks away,” says Johnson.

“As the industry matures, there will be a better understanding of location determinants and the healthcare industry, including healthcare real estate, will need to figure out the outpatient opportunities and how to make them successful,” concludes Johnson. “We are already on that journey.”