Healthcare has been one of the hottest sectors for hiring in the past few years with 1 in 5 new jobs being healthcare related. Since 2008, the healthcare industry has added almost 1,000,000 jobs in total. According to the US Department of Labor, employment in the industry is predicted to increase by 22 percent by 2016, double the predicted rate of growth of non-healthcare professions.
Strength in the healthcare industry translates into a stable and highly attractive sector for real estate investors. Demand for healthcare real estate is up and vacancy rates continue to decline as excess space from pre-recession overbuilding is absorbed into the market.
Healthcare assets are stable investments because physicians tend to be heavily invested in their office locations and thus stay in place for long periods of time. Combine this with the increasing demand for health services and the results are real estate assets with long-term leases and relatively little income variability due to vacancy loss.
Factors contributing to such high growth in the healthcare industry and subsequently the healthcare real estate sector include the increase in the overall population and the trend for hospitals and larger groups to grow through consolidation and acquisition of smaller practices and competitors.
The continuing rise in the overall population is a key factor in the continued growth of the healthcare industry. In addition, the portion of the population aged 65 or older continues to grow as a result of aging baby boomers, a group that averages twice the number of yearly office visits as compared to the general population. This demographic is predicted to grow by 36% over the next 10 years.
Hospitals and larger medical practices have continued to embrace the theory that growth through consolidation and acquisitions will help them provide services at lower costs and increase their market share. This practice results in a lot of excess real estate that healthcare organizations seek to shed through monetization or the sale and leaseback of their assets.
Monetization is an increasingly popular strategy among healthcare institutions. The ownership of real estate is generally not considered to be a core part of a practice’s business. Institutions are beginning to understand that facility ownership and management activities tie up resources that could otherwise be used to grow their core business and generate healthier returns. Many providers are seizing the opportunity to shed real estate assets through sale/leaseback transactions and re-deploy their capital to healthcare operations.
By:
Drew EllerInvestment Advisor at Coldwell Banker Commercial TradeMark Properties
Interesting read... Shows the specialization,or core, priority for healthcare business is similar to any other business venture. We se a lot of investors drawn to healthcare-backed property investments.
ReplyDeleteInteresting read... Shows the specialization,or core, priority for healthcare business is similar to any other business venture. We se a lot of investors drawn to healthcare-backed property investments.
ReplyDelete