Demand for Medical Office Buildings Continues to Grow
Real estate has historically proven to be a great asset to diversify an investment portfolio, but it has also demonstrated resilience when economic conditions are tough.
Medical office buildings have emerged as a property type that may help weather the storm. According to MedCity News, healthcare-related real estate has experienced growth in general, but medical office buildings, such as urgent care and specialized practices, have emerged as one of the most popular property types within the niche. Medical office buildings offer more consistent and positive income growth due to long-term leases and continued demand.
Technological Advancement Paves Way for Growth
As technology continues to advance, medical office buildings continue to offer more services that may have traditionally required care in overpopulated hospitals or emergency rooms. These advancements are coming at a time when demand for medical care and services is growing due to the large demographic of baby boomers that are beginning to enter their later stages of life. According to IREI, “the 65 and older demographic is expected to comprise 23 percent of the total population by 2060…” and “...annual doctors’ visits multiply by 2.5 times for the 65 and older cohort compared to the rest of the U.S. population.” The increase in demand for services is also prompting an increase in demand for physicians and medical providers. The combined demand makes healthcare one of the largest and fastest-growing components of the U.S. economy.
In-Person Medical Care is Still In Demand
Healthcare is something that will always be in demand, and it’s unique in that there will always be instances in which an in-person medical appointment is essential. There is also a culture shift happening in which many Americans are more invested in their health and well-being. Whether it be a routine medical appointment with their primary care physician, or a visit to the dermatologist or chiropractor, many people are more consistently making visits to medical offices. Compared to other industries, like the shopping industry, where online storefronts are becoming increasingly popular as our lives continue to evolve, medical office real estate will continue to be needed.
Medical Tenants Generate a Healthy Income Stream
Medical tenants also come with benefits of their own, including high tenant credit and long-term leases. These tenants generate a healthy stream of income largely credited to copays, out-of-pocket patient expenses, insurance, and government reimbursements. Tenants may also be affiliated with hospitals or larger health systems, which contributes to a larger influx of patients. Successful offices with a strong patient following could also attract complimentary tenants, as other practices may want to be positioned in the vicinity of each other to capitalize on their patient pool.
Although the future may be unknown, all signs point to the growth of medical offices continuing. As a large group of Americans get older and more health conscious, the demand for outpatient services and providers will continue to increase, making medical office buildings an intriguing option for investors looking to diversify their portfolio.
If you’re interested in learning more about medical office real estate, and opportunities that we have available, please contact our team.