High interest rates can significantly impact the commercial real estate market, including the healthcare real estate market. When interest rates are high, it becomes more expensive for businesses and individuals to borrow money to purchase or refinance commercial properties. On the one hand, this can lead to a decrease in demand for commercial real estate as the cost of borrowing money becomes prohibitively expensive for some potential buyers. On the other hand, if you have capital, this can be a great time to invest as you have the upper hand during negotiations and less competition from buyers.
Additionally, high interest rates can have an impact on the value of existing properties. As the cost of borrowing money increases, the value of commercial properties can decrease, negatively impacting the net worth of healthcare providers that own real estate.
However, despite the challenges that high interest rates can present for the healthcare real estate market, it is important to note that many factors, such as population growth and healthcare spending, still drive the market, making it an excellent time for some to invest.
High Interest Rates & Healthcare Real Estate
Despite the challenges that high interest rates can present for the healthcare real estate market, it can still be a good time to buy healthcare real estate for a few reasons:
- Long-term investment: Healthcare real estate is considered a stable and long-term investment. The demand for healthcare services is driven by an aging and growing population, which creates steady and consistent demand for healthcare facilities. This can help mitigate the risks associated with high interest rates in the short-term.
- Potential for rental income: Healthcare real estate properties, such as medical office buildings, can generate rental income from healthcare providers, which can provide a steady stream of income to offset the costs of borrowing money at high interest rates.
- Tax advantages: Healthcare real estate investments may offer tax advantages, such as depreciation and tax-free exchange opportunities. These advantages can help to offset the costs of borrowing money at high interest rates and provide a good return on investment.
- Diversification opportunities: Investing in healthcare real estate can provide diversification opportunities for investors. By diversifying their investment portfolio across different asset classes, investors can reduce the overall risk of their portfolio.
In summary, high interest rates can have a negative impact on the commercial real estate market. It can make it more difficult and expensive for businesses and individuals to borrow money to purchase or refinance commercial properties, potentially decreasing demand for commercial real estate. Additionally, high interest rates can also negatively impact the value of existing properties. However, if you have the capital on hand, other factors driving the market still point toward this being a good time to invest and buy commercial real estate property, especially healthcare real estate.
It’s important to note that even though the market is still considered relatively resilient, it’s always important to consider the current market conditions before making any investment decisions. Before making any investment decision, consult with a healthcare real estate expert and financial advisor.
If you need assistance navigating this ever-changing healthcare real estate market, contact our team today.
About HBRE
Headquartered in Nashville, Tennessee, HBRE is a full-service commercial real estate firm specializing in healthcare real estate. With over 50 years of combined industry experience serving 28 states across the U.S., we deliver exclusive healthcare solutions so you can provide the best patient care.
