Following the Money - Healthcare as a RE Opportunity

Healthcare-related real estate is shifting from being a specialty asset class to a core asset class by investors.

With the current market uncertainty hovering across most of consumer, service and industrial aspects of the economy, both accredited and sophisticated Investors are looking to capitalize on the trend and betting on healthcare, an area that tends to be insulated from economic ups and downs.

"Investor interest is robust, supply is limited and health care investment management expertise is at a premium," Blake Williams, chief operating officer of Transwestern, said in an email. "Developers will continue to pursue new projects in these conditions, which we believe will persist for the near term."

As the U.S. population's demographic shifts with aging baby boomers and millennials who are starting families, investors have become more keenly interested in putting money into healthcare-related real estate developments. Transactions involving healthcare real estate reached near all-time cyclical highs of nearly $12 billion for the 12 months that ended June 30, 2018, according to to CBRE's latest U.S. Medical Office Buildings report. The total number of outpatient centers in the United States between 2005 and 2016 grew more than 50% to about 41,000 as medical providers seek to provide care at a lower cost to patients, according to CBRE. 

Meanwhile, capital-constrained healthcare systems are seeking to expand to meet growing consumer demands, and there is a lot of "a lot of pent-up capital" wanting to invest in health care, said Eric Johnson, executive managing director for Transwestern's national health care advisory service group. 

As for our point of view, we are seeing plenty of outside capital wanting to own medical office buildings, outpatient facilities and micro-hospitals, precisely because of the stability of the sector and revenue streams. This is true with both traditional and alternative caregivers. With longer lease (and purchase/lease-back) terms, this segment has potential for growth in a city that’s known for world-class medical care. Let us know if you’re interested in learning more.

With information published by Candace Carlile / CoStar