The Evolution of Healthcare and it's Impact on Commercial Real Estate

October 14, 2017

As the shape of the healthcare industry changes, healthcare companies’ real estate needs are changing and growing along with it. Although the healthcare industry is notoriously resistant to change, certain external factors are demanding providers adapt to the demographic shifts among their consumer base and those adaptations require new facilities.


That’s good news for developers.


“Patient convenience” and “decentralization” are the new buzz words in the healthcare industry. Historically successful MOB’s (medical office buildings) are now facing significant vacancy because newer facilities are built to satisfy the demands of the patient population that want easier access, better signage and parking, smaller more specialized services in a warmer and a more welcoming environment.


We have already seen a shift away from high inpatient volume and services on a hospital campus to a more community-based satellite facilities, which in turn, requires new buildings to meet the growing demand. Part of this trend is due to the Affordable Care Act, which has changed the reimbursement model for insurance companies and care providers, forcing strategic change in how healthcare is delivered. It is forcing healthcare providers to rethink the old hospital campus model and evolve into a more hub-and-spoke model.



Successful facilities need to be strategically located, which in the past meant being near a hospital; however, this is rapidly changing. Hospitals want these facilities in centralized locations that are easily accessible by multiple towns with a strong payer mix. Medical real estate is no longer being tucked away in an office complex. Healthcare is now competing with banks, pharmacies, restaurants, and coffee shops for the corner lot.


I feel that markets with the most population growth will be those with the highest demand. Our country’s aging population – some 10,000 baby boomers turn 65 each day – as well as increased access to healthcare are generating unprecedented demand for healthcare services across the entire country.


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