April 2025
Strategic Healthcare Development
The healthcare real estate sector is facing unprecedented pressures, driven by a growth of economic, regulatory and operational factors. From escalating construction costs and inflation to labor shortages and supply chain disruptions, the landscape for developing new medical outpatient buildings (MOBs) is increasingly complex. Not to mention, the uncertainty surrounding tariffs further complicates the market, impacting the profitability of future developments. According to Healthcare Realty, there are several critical factors that could hinder progress in healthcare real estate, including:
- Short-term Price Increases: Tariffs on imported medical supplies and equipment can lead to higher costs, straining healthcare budgets and potentially increasing insurance premiums until domestic manufacturing scales up.
- Market Uncertainty and Policy Changes: Uncertainty about future tariff policies may deter companies from investing in U.S. production, as abrupt changes could lead to financial losses, highlighting the need for a clear and stable policy approach.
- Time Lag for Domestic Manufacturing Expansion: Building a robust domestic healthcare manufacturing sector requires significant investment, regulatory approvals, and workforce training, meaning healthcare providers may still need to rely on potentially higher-priced imports until domestic capacity is fully developed.
Perry Higa, Executive Vice President – Corporate Services, NAI Hiffman, agrees with the uncertainty of President Trump’s tariffs which has added to an “already unstable CRE market.” Higa highlights that rising capital costs, inflation, labor shortages and supply chain disruptions are key issues impacting the viability of new medical office buildings (MOBs). Higa adds, “Also affecting the MOB built-to-suit process are changing zoning laws, medical reimbursement structures (i.e., Medicare/Medicaid, private insurance companies) and Certificate of Need from the State Regulatory Agency, all of which affect the overall viability and profitability of future MOB developments.”
John Fard, PhD, System Director, Real Estate Strategy, CommonSpirit Health®, notes that the healthcare sector is under “mounting pressure from evolving care delivery models, tight margins, and rising development costs.” Fard suggests aligning real estate strategy with enterprise goals, considering shifts in demand, payer pressures and market dynamics. “It’s extremely important these days that organizations ensure capital investments are maximizing value for the care delivery network with robust planning and data-driven insight.”
Fard will be discussing these topics in more detail as a speaker at the upcoming BOMA International Medical Real Estate Conference, taking place May 7-9 in Denver, CO. During his session, “Healthcare Strategy,” panelists will discuss how real estate professionals can navigate these real estate decisions, while exploring how population growth and demographics are used to determine growth and the ambulatory footprint.
Addressing the growth of our aging population remains a big topic in healthcare. The U.S. Census Bureau reports that the population aged 65 and over grew nearly five times faster than the total population from 1920 to 2020, amplifying pressure on healthcare systems to meet the growing demand for space.
John Wilson, HSA PrimeCare President, affirms that meeting the increasing demand for healthcare services, especially with our aging population, is one of the industry’s biggest challenges. Wilson also highlights high construction costs and interest rates as concerns, especially with the 10% universal tariff on imports, the highest rate in over a century according to Commercial Property Executive. “To address the challenge, healthcare providers can partner with real estate professionals to provide equity to fund new facility construction,” Wilson says. “Furthermore, the construction pricing that was stabilizing will now need to incorporate tariff changes. A healthcare real estate partner can help the provider navigate this issue.”
Embracing partnerships could be key to success. Here are three expert tips for overcoming healthcare’s biggest challenges, with collaboration as a key theme:
- Foster Early Collaboration Between Providers and Real Estate Professionals
Fard: “Providers and real estate professionals can optimize their work together by collaborating on a programmatic plan that aligns strategy and real estate across a market. This allows real estate teams to be proactive in planning for broad implementation – which is critical given the long development timelines and rising costs that define the healthcare real estate life cycle. It’s equally important for real estate professionals to understand the internal decision-making timelines unique to each healthcare organization to move projects forward. Early collaboration ensures the right inputs are aligned to execute efficiently.”
- Integrate Telehealth and Technology in Facility Design to Enhance Efficiency and Access
Higa: “CRE medical brokers, developers, architects and general contractors must collaborate to understand healthcare providers’ goals. Efficiency in MOB design and project cost visibility are critical. Vacant retail buildings can be a cost-effective alternative to new construction, bringing services closer to patients. Providers must offer a clear vision, and brokers should use analytics to meet client goals on time and within budget. Patient-centered facilities should be inviting, with streamlined check-in and amenities tailored to demographics.”
- Align Goals and Optimize Medical Outpatient Building Design
Wilson: “Healthcare providers and real estate professionals can collaborate on facility design that optimizes efficiency and incorporates technology to improve clinical processes. For instance, telehealth is advancing quickly with the integration of AI and will continue growing, so it should be a key consideration when developing and renovating healthcare real estate. This is especially important given the physician shortage facing the U.S., where there’s about 340 million people but only 1.1 million physicians, nearly half of whom are over age 55. Telehealth capabilities can help improve access to providers, increasing satisfaction and promoting preventative care while potentially shortening the duration of appointments that don’t require an in-person examination.”
While the healthcare real estate sector faces significant hurdles, early collaboration, strategic planning and the integration of new technologies like telehealth can help navigate these complexities. A proactive, data-driven approach will be key to ensuring the successful development of healthcare facilities to meet growing demands. Click here to learn more and register for the BOMA International Medical Real Estate conference, where experts will discuss the latest industry trends in the medical real estate industry.
About Hiffman National:
Based in the Chicago area, with an additional five regional hubs and 30 satellite offices, Hiffman National provides superior property management, project services and accounting services to a diverse portfolio including office, medical office, retail and industrial properties nationally. The firm’s comprehensive property management platform and attentive approach to service contributes to client NOI and has helped the firm to more than double in size in five years. Hiffman National is an award-winning company with more than 250 employees strategically located throughout North America.
About NAI Hiffman:
NAI Hiffman is one of the largest independent commercial real estate services firms in the US, with a primary focus on metropolitan Chicago, and part of the NAI Global network. We provide institutional and private leasing, property management, tenant representation, capital markets, project services, research, and marketing services for owners and occupiers of commercial real estate. To meet our clients’ growing needs outside of our exclusive NAI Hiffman territory, we launched Hiffman National, our dedicated property solutions division, which provides property management, project services, and property accounting services across the country. NAI Hiffman | Hiffman National is and award winning company headquartered in suburban Chicago, with more than 250 employees strategically located throughout North America.
