NEW YORK, N.Y. – Newmark Grubb Knight Frank (and its Global Healthcare Services group) has recently published its 2017 Healthcare Outlook report, and has found that despite copious uncertainties in healthcare legislation, demand for healthcare real estate investment sits at an all-time high. There is also an increased demand for capital and cost reduction, driven by consolidation and the need for innovation, which is related to consumer demands for improved access and better patient outcomes. A transition has also been taking place in construction, rental rates and absorption, as consumer demands and trends continue to evolve. The report goes into detail on four key trends outlined by the Healthcare Financial Management Association: transition to value, consumerism, consolidation and transformation innovation—all of which impact the need for capital and the demand for change in healthcare real estate.
The report also describes likely reasons why healthcare property markets (on both the occupier and investment sides) have been able to shrug off industry disruption. For example, demographic density; the aging of U.S. populations is creating overriding demand for products, service and real estate. Seniors aged 65 and older comprised 14.9 percent of the population in 2015, but will account for 19 percent by 2025, with the absolute number increasing from 47.8 million to 65.9 million. While the 65-plus age group is growing more in certain locations, it is a wide movement that is happening everywhere.
Additionally, healthcare employment is steadily on the rise, having increased 95 percent since 1990. With that, medical office space absorption has increased and the market has seen private investors’ stake reach its highest-ever just last year. This rapid growth of employment is expected to continue, as well; in its latest occupational forecast, the Bureau of Labor Statistics projects the two fastest-growing occupations from 2014 to 2024 will be healthcare/tech practitioners and healthcare support, together adding 2.3 million new jobs. The demand for healthcare properties is expected to remain solid as the industry continues to develop. An apt comparison for the healthcare market may be conventional office space – technology, combined with the changing design of space (e.g., open-office concepts), has significantly reduced the required space per employee while the demand for space continues to rise.