Demand for Healthcare Properties Rises with the Tide

20 Nov 2017

Demand for Healthcare Properties Rises with the Tide

Investor demand remains strong for healthcare properties throughout the country despite a cooling of the retail market space. Healthcare properties are viewed by many investors as “recession-resistant” because the services provided at these facilities are need-based. With steady demand in nearly any economic environment, healthcare properties have the ability to consistently generate strong returns.

Additionally, provider confidence in the healthcare marketplace is on the rise primarily by the coming “silver-tsunami,” and secondarily by resiliency of the Affordable Care Act (ACA) and the multiple failed attempts to repeal the law. These demand drivers have given healthcare tenants the confidence to sign long-term leases.

With an expectation that government spending on healthcare, as a percentage of gross domestic product (GDP), is set to rise above its current level of 15 percent, and with one in five persons age 65 or older by 2040, it all adds up to a healthy and sustained flow of capital into the healthcare sector from institutional, private and foreign investors markets.

“Anticipated future demand on healthcare services resulting from the aging boomer generation is the key component in driving investor interest,” says John Flint, Executive Vice President, Asset Management and Strategic Initiatives for Lockard. “This wave of demand looks and feels recession-resistant for healthcare real estate, which can be comforting to investors.

The healthcare real estate market is showing a vibrancy that is prompting fund managers to act quickly and decisively in healthcare investment opportunities. New investment opportunities have taken a little more time to materialize due to heightened interest from institutional investors- the added competition makes it more difficult to secure a profitable opportunity. But when an opportunity is secured, the outlook is very positive.

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