The race is on to meet patients where they are

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Healthcare real estate is being transformed as we speak. How? Two trends have emerged to illustrate the changing market.

1. The “retailization” of healthcare is on – and more is on the way.
The growing and shifting healthcare landscape is continuing to push real estate strategies outside traditional settings. Healthcare providers are moving away from the hospital-as-hub model, and instead moving into community settings.

Getting to the patients first is key to the growing healthcare industry. As a result, healthcare-anchored retail centers were born. Urgent cares, walk-in clinics and freestanding emergency rooms are all making their way into retail locations. Grocery-anchored retail centers are the property types in the hottest demand.

In Phoenix, prominent brand name providers are seeking these retail-oriented properties, wanting to be where the population is and have maximum signage. Banner Health purchased a portfolio of free-standing urgent centers in high-traffic locations and Dignity Health has 11 new freestanding emergency rooms. Cancer Treatment Centers of America recently opened two off-campus clinics and are working on the third to be open by next April. They plan to open more in the future all over the Valley.

2. Healthcare real estate will continue to grow into a Core asset type for investors.
Healthcare real estate ownership is already no longer dominated by specialty healthcare real estate investment trusts. New investors are entering the market – and it is probable that this trend will only continue as more parties see the tremendous, yet stable growth in this newly dynamic sector.

Consistency over the last five years is fueling confidence in the healthcare sector. Among traditional investors, medical office buildings (MOBs) continue to be the most popular property type in the healthcare niche. Investors are doubling down on this class of buildings because they are stable and will continue their strong performance. We’ve been seeing exceptional pricing performance, too, with dollar-value-per-square-foot currently at peak levels.

In Phoenix, the interest in MOBs is being fueled by Arizona’s large retirement population. As our patient population increases, the need for more healthcare facilities will grow. We’re seeing more non-traditional investors interested in MOB’s and more investors are entering the market, which drives up competition and cap rates downward. For stabilized MOBs with long term leases, we are seeing cap rates between 5.0% and 6.0%.

As healthcare real estate continues to evolve, it will do so in many shapes and sizes. Learn more about real estate trends impacting today’s healthcare industry. Download our 2018 Healthcare Real Estate Outlook.

About the author

Katie McIntyre is a Senior Associate and co-leader of JLL’s Healthcare Solutions group in Phoenix. Focusing her attention on agency leasing, tenant representation and investment services, Katie works with healthcare systems, practice groups and medical building owners to help them meet their healthcare real estate and business goals.