3 Things You Need to Know Before Investing in a Medical Office Building

Every single day, 10,000 baby boomers reach the age of 65. That will continue to happen for at least the next dozen years or so. These aging boomers who need more medical services are a big factor behind the growth of the medical office building sector.

Medical office building

Another factor behind growth in the medical sector is the number of previously uninsured Americans who are now insured. It is estimated that over 20 million Americans now receive medical insurance under the Affordable Care Act.

In response to the growing need for healthcare, urgent care clinics, micro-hospitals, and other medical facilities have sprung up all over the nation. Unlike some other categories of commercial real estate, medical office buildings are not impacted by factors that plague other sectors like retail and restaurants.

Considered by many to be ‘no-lose’ investment and encouraged by their seasoned commercial real estate brokers, commercial real estate investors are jumping into the medical market to take advantage of this growth. If you have considered investing in medical real estate, below are 3 things you need to know before buying a medical office building.

1. The #1 Axiom of Real Estate

Choosing a location is a ‘make or break’ decision. Businesses on or near main roads with higher traffic counts and better visibility typically perform better than businesses in other locations. The medical office building must also be close to a sufficient number of people. Lacking a large enough population and an adequate density of people, a medical business may not succeed.

Also, a medical building should offer ease of access and convenience for patients. If another medical facility offers the same level of care but is more conveniently located near more people, the average person goes to the closer option.

In addition, some locations in the country are better than others for buying a medical office building. “Sunbelt” states, like Florida, California, and Arizona, which all have mild year-round climates, attract retiring boomers as well as families seeking an active lifestyle. Investing in a medical office building in one of these locations is a smart choice. In order to learn as much as you can about the location, a market analysis will provide you with the data you need.

2. Questions About Size

When seeking to purchase an existing medical office building, the size of the facility is another key factor. Some key questions to ask regarding size are:

  • How many care providers could the building hold?
  • Is there adequate space for imaging technologies?
  • Are there lab facilities or the capacity to add them?
  • How many patients does the waiting area hold comfortably?
  • How many parking spaces are on site?

Another issue related to size is the capacity to expand the facility. An existing medical office building that isn’t quite big enough could be expanded. Plans for future expansion of services may create the need for additions to the existing structure or even the construction of an additional structure. Buying a property which has room for expansion provides options for the future.

3. Updated or Outdated?

A couple of decades ago, it might have been worthwhile to buy a property for cheap and convert it into a medical office building. However, changes in technology have created a unique type of commercial property.

Modern medical office buildings are more specialized and more digital than ever before. Along with advances in and increased reliance upon technology, medical facilities need ways to save on costs like power. This has produced ‘greener’ medical facilities with features like super-efficient HVAC systems and LEED certification.

An outdated structure that is not fitted for the latest medical, communications and other technologies requires a significant investment to bring it into the 21st century. Although new isn’t always better, when it comes to medical facilities, the physical environment needs to be concurrent with contemporary medical technology.

Making Smart Decisions When Buying a Medical Office Building

Retail stores are increasingly affected by e-commerce. Most restaurants don’t last more than a single year in business. But people will always need healthcare facilities. Because of this, many investors see medical office buildings as ‘no-lose’ investments.

When choosing to purchase a medical office building, consider the location including the population density and proximity to residential areas. Also, examine the size of the property, not only the building itself but the land it sits on as well.

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