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Three Health Care Investment Trends For 2022

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The healthcare sector was one of the beneficiaries of the pandemic, and the industry is rapidly growing.

As investors plan for 2022, Meridian CEO John Pollock is predicting three trends will drive activity healthcare real estate.

1. More Outpatient Facilities

The transition to outpatient facilities has been an ongoing trend over the last decade, and it accelerated during the pandemic.

“Services are migrating away from the acute care centers to more convenient outpatient centers” Pollock tells GlobeSt.com. “Ambulatory outpatient care facilities have been at the center of Meridian’s focus for years and we expect this trend to continue to accelerate and translate into more opportunities for investors, developers, and providers alike.”

2. Telehealth Gaining Momentum

Telehealth is the second major trend that Pollock sees gaining momentum this year.

“Everyone has read about the rapid adoption of telehealth during the pandemic. It certainly spiked in 2020, and while it has since leveled off, it is still an integral and effective means to deliver care,” Pollack says. “The physical manifestation of that trend is creating more flexible exam and telehealth rooms.”

The telehealth trend supports better patient care, especially as providers rush to build outpatient ambulatory facilities.

“We have seen an increasing need for outpatient ambulatory care centers either de novo or through renovations that require heavy lifting to meet the new care delivery models,” says Pollock. “A huge benefit of telehealth is providing greater access to care. During the pandemic, it provided a vital access point to care when physical appointments were not practical. Telehealth also allows patients in rural settings to have access to a specialist from the urban centers.”

3. A Focus On Behavioral Health

Finally, health care providers will increase focus on behavioral health.

“We are seeing numerous requirements,” says Pollock. “The stress, isolation and loss caused by the pandemic was the final straw and it is now widely known that behavioral health conditions impact one in four Americans.”

It isn’t only cultural changes that are driving activity in the behavioral space, but institutional investors are also backing these projects.

“Institutional investors have warmed up to having behavioral health tenants in their buildings and portfolios, and we have even seen cap rates move toward traditional medical office building valuations,” says Pollock. “It’s very exciting to be a part of creating more access to these much-needed services in our communities.”

 

Source: BenefitsPRO

The Pandemic Has Made Healthcare More Desirable

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“The pandemic increased demand and made healthcare a more desirable asset class,” Rahul Chhajed, VP and senior director of healthcare at Matthews Real Estate Investment Services, tells GlobeSt.com about how the asset class fared during the pandemic.

For one, medical properties moved onto the list of darling asset classes, and it isn’t hard to understand why.

“It is no longer just a recession that investors are worried about. If there is another pandemic, healthcare services are something that people are always going to need. At the end of the day, everyone needs medical care,” says Chhajed.

With the exception of a temporary pause in the market at the beginning of the pandemic, when elective surgeries and other healthcare services were paused to allow healthcare providers to focus on COVID-19, healthcare properties outperformed other asset classes. Chhajed notes that many tenants didn’t need rent relief and continued to pay rent.

This year, investors have been trading out of more challenged asset classes, like retail and office, in favor of medial facilities.

“COVID really provided a proof of concept for the industry to show that this product type is here to stay. It is not only institutional, but it is an asset class that private capital should look at as well,” says Michael Moreno, VP and senior director of healthcare at Matthews Real Estate Investment Services.

Institutional capital has been the dominant player in the healthcare sector, and that is because it can be a more complicated asset class. Now, both institutional capital and private investors are competing for deals.

“More institutions have definitely entered the ring, but we are also seeing the private markets have started to buy these deals,” says Moreno.

And, there is a third player: owner-occupiers. Existing owners are looking at the demand—which has driven cap rates down significantly—and deciding to sell.

“The sale-leaseback market is really picking up, and a lot of that has to do with pricing,” says Moreno.

Over the last few years there has been significant cap rate compression, and owners would rather take the proceeds and put it back into the business and grow.

“Private buyers love those deals because they typically contain long-term leases and they are triple net,”  Moreno says.

On the lease side, retail owners are finding new users in healthcare. Many clinics and ambulatory centers are signing leases in retail facilities as part of the trend from in-patient care to out-patient care.

“Retail-centric healthcare is great for providers because the care is coming to the consumer,” says Chhajed. “A lot of these healthcare systems are looking for ways to provide ease of access, and retail centers meet those needs to make healthcare more accessible. The confluence of these trends is creating a heyday for medical assets after the pandemic. Now healthcare is looking stronger than ever.”

 

Source: GlobeSt.