Healthcare is modifying to meet consumer demand in communities and in rural areas and is seeing changes with the implementation of telemedicine, medical office buildings in retail space, community hospitals and clinics, urgent care and dialysis centers. In a recent breakout session at the 2020 CREW Network Convention, panelists focused on how these modifications are impacting commercial real estate and talked about the impact of Covid on the healthcare system.
When asked if healthcare was recession proof, Lorie Damon, managing director of the healthcare advisory practice at Cushman & Wakefield, said that historically, yes, it has been recession proof, noting that in general, healthcare makes up nearly 20% and 16 million employees and the real estate emanating out of that is fairly substantial with a best guess being around 3 billion square feet.
But consumer spending on healthcare services has dropped pretty significantly in the first quarter, she said. “After an almost uninterrupted increase over the past 30 years, spending dropped off. If patients didn’t have to go, they didn’t. The result was a steep drop in employment at dentists, doctors’ offices etc. from February to April.”
Employment in offices has bounced back, she added, but other service providers are seeing much slower recovery. “The good sign, though, is that overall the sector is recovering. Medical office transaction activity has held up remarkably well,” she said, adding that rent rates are also holding steady as is occupancy.
“All that has created a condition where investors are eager to purchase office building,” Damon explained. “Activity slowed sharply in April and May but has rebounded.”
But what is interesting to note, according to Damon, is the investor mix. “Foreign investment has trailed off significantly, but we have seen larger activity from private equity buyers, most notably, Welltower sold off a large portfolio that was purchased by Kayne Anderson.” Interestingly enough, she added, she has received about a call a week from investors who are eager to make a move now and jump into the sector.
“In general I was nervous in the spring that Covid might be the pandemic to which healthcare proved not to be recession proof but it is holding up well,” she said. “It has adapted to really think about the space itself and how to ensure that we are creating a safe space for everyone to be there and receive care in the safest possible fashion.”
To learn more about the healthcare industry, join the industry’s top owners, investors, developers, brokers and financiers as they gather and share their insight and outlooks for the marketplace for the Healthcare real estate event of the year. GlobeSt.com’s virtual healthcare event will be held December 2nd and 3rd.
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