While the market is always changing, recent events brought a whirlwind of change to the medical real estate market. For a while leading up to the pandemic, we had been expecting an increase in medical demand due to the aging baby boomer generation. Demand for medical real estate was already high with no sign of slowing. But the unexpected events of 2020 caused a significant change of course. While the aging baby boomer generation was still a factor for healthcare teams, so was a rapidly spreading virus that impacted the older population the most. The pandemic took its toll on both individuals and the economy.
Over the last several months, the healthcare industry has had to postpone elective procedures, and some clinics have had to temporarily close their doors. Some health systems had to lay off staff while others were in desperate need of medical professionals. Now, as the dust settles, we are beginning to see the aftermath and the immediate future of the medical real estate market. The market has changed in a few significant ways.
Medical Real Estate Facility Design
The physical design of a medical facility may include some noticeable changes in the future. One source explains that facilities that have been built after the pandemic began have included more open staircases, as some visitors are more likely to avoid small, enclosed elevators. That source also indicates that touchless entry will be implemented more in future projects. And many healthcare groups will need to consider adding flex space and/or rooms for physicians to engage in telehealth visits.
On a more general facility design note, some medical groups will take up occupancy in now-vacant retail locations. While medtail is nothing new, the strained retail sector has left more opportunities for more adaptive reuse projects.
Senior Housing
In 2020, senior housing occupancy rates fell. Lumen explains that many had to limit or pause the admittance of new tenants. This source also suggests that occupancy rates will continue to fall in 2021, but afterward, they may begin to see growth. And, while the skilled nursing segment has also seen a drop in occupancy, they are critical for some patients who are discharged from hospitals. Investors of skilled nursing facilities are concentrating on the long-term.
Changes are taking shape in the physical design of senior housing facilities as well. One design source suggested creating individual “ecosystems,” within a facility. These subsections could offer dining, a lounge, space for telehealth visits, etc. Another design source explains that outdoor spaces are of prime importance for senior housing facilities. And cleanliness and airflow will continue to be a heavy focus. The latter source predicts codes revolving around new airflow systems will change in the future.
The Life Sciences Trend
The life sciences sector is gaining attention. An article from GlobeSt.com suggests that demand for life sciences spaces has increased, specifically for the biotech segment. In light of the growth, some developers are considering office-to-lab conversions. Currently, in the greater Boston area, there are 7.8 million square feet of present and projected office-to-lab projects. While converting an office to a lab space may not be the best route in all markets, the bottom line is that demand for lab space may be outpacing supply. (For more information about life sciences, check out The Life Sciences Trend in CRE).
Medical real estate will continue to adapt to the post-pandemic era. As HBRE continues to engage in a variety of medical real estate negotiations and transactions, our team is continuously staying up-to-date on industry news. Health professionals who have questions about what changes might affect their specific property types can reach out to our team of advisors for the latest medical real estate guidance—[email protected].
If you are interested in learning more about investing in commercial real estate, or if you have questions about buying, selling, or leasing a commercial property, please contact an HBRE advisor. Our team of experienced CRE professionals have the skills and insight to assist with all property transactions. To reach out to us directly, email [email protected] or call 615-564-4133.
