Healthcare is a Slow but Steady Sector
Healthcare has very different drivers when it comes to growth and demand. While highs and lows in the economy influence healthcare in many of the same ways other industries experience, it’s also governed by trends that are unique to how people seek — and pay for — their medical treatments. Chris Jacobson and Susan Wilson, both vice presidents and healthcare advisors for Lee & Associates Commercial Real Estate Services, took some time recently to talk to REBusinessOnline about today’s healthcare real estate trends.
Taking a broad look across the sector, some healthcare systems have lost revenue due to suspending elective procedures during the early months of the COVID-19 pandemic. “It’s going to take them a while to recoup that revenue,” Wilson says. “Additionally, now that they have reopened, they are spacing people out in waiting rooms, so they’re seeing fewer patients. There are currently opportunities for subleases with some major health systems. This could be an opportunity for some of the larger, more successful health systems to take over some of that space.”
Jacobson has observed that there are three types of investments occurring right now. The first of those are large healthcare systems presently focused on COVID-19-related care. The second is a category of providers waiting to see what happens once the pandemic has subsided. The third group are more entrepreneurial practices that are trying to take advantage of a slowdown and use real estate to their advantage.
Those wishful buyers, however, may not get the prices they’re hoping for. The uncertainty of where the economy is headed has resulted in rising property costs. But that doesn’t necessarily mean that healthcare real estate instantly reflects economic trends.
“Healthcare tends to look at trends in decades, as opposed to retail or office, which tend to look in years,” says Jacobson. “So, it’s a much longer-term approach. Even in 2009, when the Affordable Care Act was being initiated, healthcare didn’t go through many bumps as providers waited to see how they were going to get paid. It really didn’t change that much.” Jacobson also explains that, unlike other sectors that look at location demographics, healthcare follows insurance trends, and is thus more related to where people work than where people live and shop.
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