The medical real estate market has experienced steady growth over the past decade making it a sure bet for everyone involved. Apart from hospitals and clinics, medical real estate (or healthcare real estate) also encompasses medical offices, geriatric care centers, on-demand diagnostic care centers, imaging centers, outpatient surgery centers, ambulatory care centers, primary outpatient service centers and home health-care delivery systems.
In this specialized real estate niche, medical offices and facilities have different requirements than normal commercial real estate. The technology, climate control, filtration, sterilization and maintenance needs of medical real estate are much more involved than those of any other type of property. Below we look at reasons why the healthcare sector continues to grow so rapidly and also list some of the largest medical real estate projects in development in the United States.
Reasons for the Growth
Over the past decade or so, growth in medical real estate has been both steady and profitable due to number of factors:
● There are now more older Americans than before and this elderly population is steadily rising. In 2004, 36.3 million people were over 65, making up 12% of the total population. Projections from the US Census estimate that by 2050, 86.7 million people will be aged 65 and older, 21% of the total population.
● Advances in medical technology have allowed more and more medical procedures to be done outside of hospital settings.
● In some areas of the nation, strong population growth has outpaced the supply of medical offices.
● With little new construction in these areas, the demand is great and the medical office markets have become very tight as increasing populations wait for new construction to come on line.
● Investors have increasingly looked to take advantage of the stable tenant base in medical real estate and the relatively high lease rates .
The Construction Pipeline
In February 2016, Becker’s Hospital Review cited Revista’s US Construction Report, which outlined the active and growing state of the healthcare real estate construction pipeline in 2015. The construction pipeline is defined as projects already under construction or in the late stages of planning. Almost 75% of those projects were expansions while the rest were new facilities, either new hospitals or replacements for aging facilities.
The report also revealed that with 1,270 projects in the construction pipeline across the nation, there was approximately 138 million square feet (MSF) of space in the works worth $97.1 billion. The report also stated that a projected 43.7 MSF of space was expected to be completed by the healthcare real estate sector by the end of in 2016. Under consideration in this report were new, expansion, or replacement medical office (MOB) and hospital construction projects greater than 7,500 square feet and more than $5 million in value. These projects were happening in every state in the nation.
The Current Largest Medical Real Estate Projects in Development
Below are the 5 largest medical real estate projects in development in the United States, as listed by Watchdog Real Estate Project Management:
1. Tisch Hospital – NYU’s $2 billion, 800,000 square foot hospital addition with 374 new beds was expected to be completed in January 2017.
2. Hospital of the University of Pennsylvania – This $1.5 billion project will add 700 new beds to UPenn’s existing hospital. It is slated to open in March 2017.
3. Loma Linda University Medical Center – Expected to open in late 2019, this is a $1.2 billion project.
4. Lucile Packard Children’s Hospital at Stanford – This $1.1 billion hospital will add 521,000 square feet to Stanford’s existing medical facilities,
5. VA Hospital, Fitzsimmons Campus – Opening in January 2018, this $1.1 billion Aurora, CO veterans medical center will offer over 1.2 million square feet of healthcare space.
Continued, Steady Growth in the Medical Sector
As the American population continues to age, the need for more medical facilities across the nation will only continue to grow. This makes medical real estate projects the closest equivalent to a sure thing for investors, the construction sector and the commercial real estate industry.