Despite Slowdown, Medical Office Remains Strong

Medical office buildings remain strong investor favorites despite slowing transaction volume, which one expert says may persist for the next few quarters. 

“The past several years have been banner years for investors with historically low cap rates and many more buyers in the market than sellers,” says Julie A. Johnson, Executive Vice President, Arizona at Colliers, who will be speaking on a panel of industry experts breaking down healthcare real estate trends at this week’s GlobeSt healthcare conference. But “medical office buildings will continue to be strong with not only the increase of the senior population but also the population increase in many markets, specifically the Sun Belt cities.”

Johnson notes that construction costs have been “a bit of a headwind,” as have labor shortages and increased labor costs for retaining existing providers.

“There has been a physician shortage of varying degrees in markets across the country and with aa lack of new doctors and many retiring doctors there will be an increasing shortage here that various healthcare professionals (physician assistants and nursing professionals) can fill for lower acuity patient care,” she says.

Opportunities nevertheless abound for investors as new medical technology shifts more procedures to outpatient surgery centers, and as the awareness and need for more inpatient and outpatient behavioral health facilities increases. In addition, “population growth in many cities continues to drive the need for more hospital beds, medical office space and other ancillary healthcare real estate,” according to Johnson.

Going forward, Johnson says she’ll be keeping a close eye on hospital systems possibly monetizing their real estate as a result of bonding capacity, higher construction prices and focusing their capital on their core business of patient care.

Check back soon for more updates from Johnson and other panelists at the GlobeSt Healthcare conference.