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February 2023

Outpatient Health Care Services Driving CRE Income – GlobeSt.com

From “Outpatient Health Care Services Driving CRE Income” in GlobeSt.

Deliver Care in Outpatient Settings More Economical

Brian Edgerton, senior vice president, healthcare services team – NAI Hiffman, tells GlobeSt.com that after historic growth in 2021-2022, the sector is not without headwinds.

“It saw rising cap rates and fewer starts and deliveries at the end of 2022,” he said. “In 2022, healthcare real estate developers kept busy delivering modern medical office buildings to accommodate health systems and large multi-specialty practices, including those seeking to consolidate multiple specialties under one roof in highly visible, patient-proximate locations.

“At the same time, developers are feeling the squeeze of construction cost increases, supply chain delays, and interest rate hikes, all of which are reflected in the higher rental rates that must be charged to make these deals pencil out.

“Yet, even if they’re paying more today than they would have a year ago, it is still more economical and efficient for providers to deliver care in outpatient settings, many of which are located in close proximity to where their patients live and work.”

Edgerton said that like retail, healthcare increasingly follows rooftops, “so services are moving closer to the patient thanks to technological advancements that can more easily be implemented in newly developed and repurposed buildings, rather than the medical office building of 30 years ago.”

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