Real Estate Trends in the Healthcare Sector

Healthcare REITs posted 24.2% returns last year -- the third-best performing sector in the market. You’d think that’s just about stability, right? But I’ve been watching this space closely, and that’s not what’s happening. It’s not just defense either, it’s growth. And not where most people are looking. Madison, Wisconsin: Not a huge metro, but 15.3% of its entire medical office inventory is under construction. Largest in the country. Miami: 11.9% pipeline growth. Cleveland, Tucson: both punching way above their weight. This is a clear sign that the market is betting on outpatient care models, suburban delivery, and state systems moving fast to modernize. It reminds me of when we first started buying practices. Everyone was focused on big names and big cities. But the best returns came from operators who moved early, before the market narrative caught up. Healthcare real estate isn’t just holding steady. In markets like these, it’s accelerating. You seeing this in your area too?

Private practices today are at a crossroads: aging patient demographics, anticipated physician retirements, and fierce competition for scarce medical office space demand a more strategic approach to real estate. Traditional medical outpatient buildings have become expensive and limited, prompting providers to weigh options like non‑traditional spaces, creative leasing models, even ownership. Crucially, succession planning and evolving care delivery must align with property strategy. Data analytics—GIS mapping, patient origin and claims insights—are playing an increasingly pivotal role in pinpointing optimal locations, avoiding costly mistakes, and shaping future expansion. Practices that treat real estate not as a static cost, but as a forward-looking growth asset, will be best equipped to future-proof their operations and enhance patient access. #medicaloutpatientbuildings #medicalrealestate #healthcarerealestate

Friends – On behalf of Joel Swider and myself, below is our weekly health care real estate briefing:   1. Over the past 12 months, Ascension has undergone a significant market realignment, including a strategic exit from several markets and service lines. 2. Four health systems are vying for CON approval to build over $1B of new health facilities in Wake County, NC. UNC Health, Duke Health, WakeMed, and Novant Health have all advanced plans to build new hospitals and expand existing facilities. 3. The Federal Reserve's recent interest rate cut is expected to accelerate hospital development as well as acquisitions of physician practices, particularly in Houston. One system that may benefit in the immediate future is Harris Health, which received voter approval last year for a bond issuance to fund a new hospital and has yet to issue the bonds. 4. The South Florida Business Journal published a roundup of 13 hospital projects that are currently under active construction or recently proposed in South Florida to meet the population increases and large senior demographic in the region. 5. The CEO of Trinity Health recently discussed the system’s creation of a community division that is focused on expanding outpatient care, such as urgent care, ASCs, and PACE program care. Trinity Health has experienced year-over-year growth of 10% in this community services division. 6. Residents in AL and IL facilities save the Medicare program money due to fewer skilled nursing stays, reduced emergency visits, and fewer hospitalizations, according to data shared at the NIC fall conference. Experts highlighted how the federal shift to value-based care offers senior housing operators a chance to secure financial incentives that have traditionally gone only to healthcare providers. 7. WoodBridge Healthcare plans to use bond financing to acquire the for-profit Commonwealth Health system (PA), including three hospitals and over 70 clinic locations, for $120M. The health system will issue up to $180M in tax-exempt revenue bonds to finance the purchase. 8. Becker’s highlighted two recent CON applications that were initially denied but later approved on appeal: (1) HCA planned a $234M hospital project in Hanover County, Virginia, which was denied until the system downsized its plans to include only a $21M surgical center; and (2) Healthcare Resources' ASC and medical office project in Hoover, Alabama, faced opposition but ultimately gained approval after a public hearing. 9. Inova Health is set to begin construction on two new hospitals in Northern Virginia, with groundbreaking ceremonies scheduled for both on September 30. These projects are part of a $2.5B expansion plan targeting completion by late 2028, which includes a 192-bed acute-care hospital and a 110-bed facility, replacing an aging hospital in Alexandria. 10. St. Luke’s Children’s Hospital in Boise, ID, celebrated the opening of the “only dedicated pediatric inpatient unit in the State.”