Investors are still confident in the medical office market even as the future of the Affordable Care Act remains in doubt.
That’s the big takeaway from Marcus & Millichap’s second-half 2017 medical office report.
The report says that even as some legislators continue to press for changes to or a repeal of the Affordable Care Act, the country’s demographics are an even more powerful force. And that force favors a continued rise in both activity and value in the medical office sector.
Specifically, Baby Boomers are aging and require more medical services. These same Boomers – and other healthcare customers – are also demanding faster services, so this means more retail clinics and the expansion of telehealth services.
It adds up to a medical office market that is both busy and evolving.
According to Marcus & Millichap’s research, by 2030, the 65 and older population in the United States will rise by more than 20 million individuals. These older Americans will account for more than 20 percent of the U.S. population at this time. This, of course, will place more pressure on medical providers to expand their services – and result in more business for brokers and developers who specialize in healthcare real estate.
Millennials are also forcing medical providers to evolve. Marcus & Millichap says that Millennials are seeking healthcare options primarily in retail clinics, urgent care centers and freestanding emergency rooms. Rural and underserved populations are gaining better medical care, too, Marcus & Millichap reports, as they become more familar with how to use telehealth services.
Micro hospitals – as the name suggests, smaller, speciality facilities – are another emerging trend identified by Marcus & Millichap. Marcus predicts that more of these small-scale inpatient facilities will open in underserved populations in the coming years, providing another opportunity for healthcare developers.
Medical office developers completed neaerly 4.5 million square feet of space during the first two quarters of the year, according to Marcus & Millichap’s research. The Midwest led deliveries, with 850,000 square feet coming online.
Nationwide, vacancies in the medical office sector declined 40 basis points in the first two quarters of the year, falling to 7.9 percent.