Healthcare Real Estate
On the Cusp
of a Boom
An aging population,
investors’ access to
capital and a dearth
of new construction all
help fuel acquisition
in medical office and
Emerging business and socioeconomic trends paint a rather murky picture of how residential, office, industrial and
By John Jordan
retail real estate will fare in coming years.
However, the demographics for healthcare
properties are clear and seem to be point-
ing in one direction, prompting one analyst
to describe the industry’s fortunes as simply
“on the cusp of a
there has been
significant acquisition activity in healthcare
real estate so far this year, including nearly
$11 billion in two M&A deals by one
Chicago-based REIT. Besides demograph-
ics, another key driver for growth in this
sector will come from investors’ increased
ability to raise capital, especially REITs.
In a June report on the investment outlook for healthcare properties, Robert
Bach, senior vice president and chief economist for Grubb & Ellis, pointed to a host of
positive demographics as drivers for significant growth this year and in years to come.
The healthcare properties market is being
“fueled by the aging baby boom generation, the youngest members of which turn
65 beginning this year,” he wrote.
Bach noted that increased visits to phy-
sicians’ offices, along with higher levels of
research and development for products
and services, will lead to growth of health-
care-related jobs at about 2. 5 times the
rate of general employment through 2018.
This will spur tenant and owner-user
demand for medical office space as well as
other types of healthcare-oriented proper-
ties. He concluded: “The Great Recession
and the current disappointing recovery
are making the healthcare property sector,
with its non-cyclical growth profile, look
more attractive compared with other prop-
erty sectors, all of which fared poorly in
The report discussed some of the demo-
graphic trends that foretell a strengthening
healthcare real estate market in the US.
• The 65-and-over age group will grow by
36% between 2010 and 2020, compared to
10% growth for the general population.
Healthcare real estate is “recession-resistant but not recession-proof,” says David Hegarty, president of
Senior Housing Properties Trust. Pictured is the REIT’s Forum at Deer Creek in Deerfield Beach, FL.