Within a decade, one-fifth of this country’s population will be age 65 or older. With more seniors
comes a greater need for care services.
It’s little wonder, then, that healthcare is
said to be one of the fastest-growing segments of the US economy.
Spending on healthcare has jumped
33% since the turn of the millennium,
according to the JLL Healthcare Outlook.
Today, the sector accounts for 17.9% of US
gross domestic product, and more growth
is on the horizon. From now through 2025,
spending is expected to grow by another
5% or more annually.
This is great news for anyone in healthcare or related businesses, and has been a
boon for job growth as well. JLL reports
healthcare employment is enjoying faster
growth than any other sector in the US.
Today, 12.2% of the nation’s workforce
works in the field, and another 18%
increase is expected over the next decade.
One of the primary drivers behind this
growth comes from providers anticipating
the need to serve the aging population,
notes Trisha Talbot, a managing director at
Newmark Knight Frank. “Legislation has
also caused providers to expand, enhance
or contract their practices to adapt,” she
says. “These changes require providers to
adjust their real estate needs accordingly.”
Although the sector is growing, not all
areas of care are growing equally. Chris
Wadley, an SVP at JLL, relates that in
Houston, for example, there was a period
of robust population growth in which major
healthcare players opened hospitals across
the metro. Today, he says, “we are seeing a
slowdown of new hospital development.
Systems in Houston are now infilling with
outpatient facilities and retail locations.”
AN EVOLVING LANDSCAPE
In looking across the landscape of patient-care facilities across the US, it’s clear is
that the image of traditional healthcare is
also shifting. According to Wadley, cost
pressures, increased demand and evolving
consumer preferences are all forcing a
change in how healthcare is delivered.
“Traditional approaches to real estate
are proving too costly to keep up with.
Hospital-centric care is giving way to an
increase in off-campus locations and alter-
nate care delivery models,” he observes.
“Younger generations want on-demand
service. At the same time, employers are
battling insurance costs with creative pro-
vider partnerships, entering into direct
Intergenerational dynamics, a rising
number of patient lives, and thin profit
margins all point to the need for new types
of real estate, in new and more locations,
Wadley explains, adding that technology is
supporting this evolution on all fronts from
physician efficiencies to streamlining the
The race is also on to meet patients
where they are. The growing number of
medical office buildings, healthcare-
anchored retail centers, surgery centers
and other healthcare specialty buildings is
capturing that demand.
Providers are moving into retail centers
or retrofitting retail spaces to move closer
to patients, points out Alan Pontius, senior
vice president and national director of
specialty divisions at Marcus & Millichap.
“We’ve observed more use of telehealth
services within practices, so that doctors,
especially specialists, can reach a broader
network of patients.”
ARE HOSPITALS DEAD?
The migration from inpatient to outpatient care, which has been taking place
over the past 20 years, has contributed to a
decrease in the national occupancy rate
for hospitals from 77% to 61% since 1980,
according to data from the Medicare
Payment Advisory Commission.
In response, healthcare organizations
have developed locations that are easier for
patients to access, such as facilities offering
varied services, including physicians and
ancillary services that are necessary to manage populations in one location.
But that doesn’t mean hospitals are dead.
Hospitals remain a crucial piece of the
healthcare delivery puzzle, say JLL analysts, since they often serve as the anchors
to a continuum of care outside of their
campus. “The key word here is ‘puzzle,’
as the retailization of healthcare continues,” the report says. “Hospital campuses
and outpatient care remain an anchor of
BY NATALIE DOLCE
INTEREST IN HEALTHCARE REAL ESTATE IS
RISING ALMOST AS QUICKLY AS DEMAND
FOR HEALTHCARE SERVICES IS GROWING