In 2024, the healthcare industry faces new competitors and technologies, while dealing with the ongoing challenges of rising costs and declining profits. Inflation will slow, but prices and interest rates will remain. Healthcare systems, providers, and investors have the opportunity to reassess their impact on real estate and their organization and strategically optimize to generate new revenue. Here are 5 trends that will drive the healthcare industry in 2024:
- Focus on Organizational Fit
- Rising costs and a limited talent pool
- Health system consolidation and vertical integration
- Disruption will accelerate consumer-centric care
- Leveraging Artificial Intelligence from theory to practice
One of the biggest advantages that an increasing number of investors are now seeing in the healthcare real estate sector is tenants’ willingness to sign long-term leases. This has prompted some traditional office owners to turn to this particular type of asset class, despite not pursuing such investments before the pandemic.
The number of office owners who previously would not pursue a medical deal in their office building for fear of fending off office users are no longer holding that line and have become willing to chase medical deals in order to increase occupancy in their assets. This makes perfect sense because it means longer deals, better credit and stickier tenancy.
You can buy a building leased by a one-practice physician group, which then gets acquired, and now you go from a tenant with $5 million in assets to $5 billion. That is obviously going to increase the value of real estate.
Redefining Real Estate Approaches, in Healthcare
Given the challenges in the industry healthcare organizations are reassessing their real estate strategies to better meet changing needs and market conditions. The importance of finding the fit for their organization has become crucial as providers now seek facilities that not align with their clinical goals but also improve patient experiences and operational efficiency. This shift has led to a growing need for healthcare properties that can accommodate care models and new technologies.
In addition, the real estate landscape is being reshaped by the consolidation of healthcare systems and vertical integration. Integrated healthcare organizations are rationalizing their medical commercial real estate holdings, optimizing asset utilization and leveraging their size to negotiate lease terms. Vertical integration, characterized by collaborations between healthcare providers, insurers and technology firms is driving demand for mixed use developments that combine care services with options and wellness amenities.
Dealing with Soaring Expenses and Workforce Shortages
The ongoing challenge of rising expenses and shortages in personnel is influencing real estate choices within the healthcare industry. Healthcare providers are increasingly focusing on cost saving strategies that involve optimizing their real estate assets to reduce costs. This includes adjusting facility sizes, implementing leasing arrangements and exploring shared medical spaces to make better use of resources.
Competition for healthcare professionals is driving demand for facilities that can improve recruitment and retention. Living near cities, transportation hubs and schools is becoming an increasingly important consideration when purchasing real estate. This trend is encouraging investors to build facilities in popular areas to attract talented workers and meet growing healthcare needs.
Moving Towards Patient Focused Care
Changes in how healthcare services are delivered are speeding up the shift towards patient focused care leading to the need for creative approaches in real estate development. People’s desire for accessible and technology driven healthcare options is influencing the design and features of medical properties. Investors are putting money into telehealth infrastructure, mobile clinics and integrated facilities to meet the changing expectations of patients. As AI technologies become more practical than theoretical, investors are looking at ways to use data driven insights to optimize their portfolios and manage risks.
Conclusion
The healthcare real estate industry is going through a transformation due to changes in the sector and emerging market trends. Investors and key players are adjusting their strategies to take advantage of opportunities arising from healthcares move towards patient oriented care models driven by technology. By embracing innovation, tackling increasing costs and redefining real estate tactics, medical commercial real estate is set to be an appealing investment option, in 2024 onwards.
