The healthcare industry is an undeniable force in the U.S. economy – it is the largest U.S. employer as of 2018, employing more than 13% of the workforce. It is also one of the fastest-growing industries in the U.S. economy. But even as healthcare real estate has grown to more than $1.2 trillion in value and is more diversified than ever, new construction is not keeping pace.
For many hospitals and health systems, reconfiguring their footprints to include more outpatient medical offices is the key to meeting new demands, and delivering care to more patients safely, efficiently, and conveniently. In 2017, healthcare spending grew to almost $3.5 trillion annually and is anticipated to grow to $5.7 trillion by 2026 – an estimated growth rate of 5.5% each year. Further, the U.S. population is projected to grow by approximately 79 million people by the year 2060 – another factor for recent healthcare economic growth. By 2060, one in four people will be over the age of 65, increasing healthcare spending given the high population of seniors.
A Boom in Behavioral Health Properties
More healthcare companies continue to invest heavily in facilities providing behavioral health services. Various factors, such as improved government reimbursements, have been driving demand for these services. But, the rising mental health and substance abuse problems reported during the pandemic have been partly attributed to the building boom.
The evolution of healthcare away from traditional hospital campuses is gaining momentum as new technology has become a key driver in the shift to outpatient care. Healthcare delivery continues to evolve toward a more decentralized model away from inpatient care at hospitals. Healthcare consumers increasingly expect greater availability and a better experience when seeking care. In response, healthcare organizations have developed locations that are easier for
As healthcare spending is expected to grow by more than nearly $2 trillion in the next decade and reach a projected 19.7% of GDP in 2026, it is even more critical to find and deliver safe, effective care as efficiently as possible. Real estate has an incredibly important role to play in re-imagining a more efficient, convenient, accessible health system
Growth Factors Within Healthcare Real Estate
1) Telehealth
Telehealth is the provision and management of healthcare in which individuals manage aspects of their care with remote support from healthcare professionals. Care is most commonly digitally mediated but supported by direct communications.
The pressures to adopt telehealth solutions to support self-management have been growing, largely because of the increasing number of patients with chronic diseases surviving to old age thanks to the pace of medical innovation.
Telehealth connects patients to vital health care services through videoconferencing, remote monitoring, electronic consults, and wireless communications. By increasing access to physicians and specialists, telehealth helps ensure patients receive the right care, at the right place, at the right time.
2) Life Sciences
The sector known as ‘life sciences’ covers a wide range of scientific fields and can be broadly described as the application of biology and technology to the study of health improvement. Life sciences include areas as diverse as pharmaceutical research and manufacturing, through to medical diagnostics, genome-mapping, and the development and production of medical devices.
As this type of research and development is so vital, life science companies often prefer to set up near public and private research institutions. At the same time, new companies are constantly emerging from these organizations, driving local occupier demand.
From a real estate perspective, life science companies require a mix of office, lab space, and production facilities. They often need commercial real estate that provides specialist functions, such as clean rooms or R&D facilities.
3) Senior Housing
Senior housing is an industry positioned for considerable growth with projections by the US Census Bureau for the 55 and older age group to increase by nearly 30 percent over the next decade, significantly more than for any other age group. Investment in senior apartments is often classified as a real estate allocation by institutional investors due to its operational transparency.
In Healthcare real estate market, demand for senior housing is treated as a market sizing exercise. Total demand for senior housing is based on the population size within a particular age bracket, the ability to pay, and the need for assistance. Demand for senior apartments could intensify if the rate of market penetration increases relative to other senior housing options.
As informed investors we should understand the risks associated with real estate investing and that there is no guarantee. Please do your due diligence.
