Posted on: 10/13/2021,
Posted by: Miel “Honey” Reyes, Staff Writer
In light of expected inflation and the COVID-19 outbreak, investors have turned their attention to medical real estate as a potential investment.
Since then, the healthcare industry has been in the spotlight. Healthcare operations continually meet stakeholder needs, employees’ safety concerns, and logistical capabilities that are being tested daily.
Is It Safe to Invest Into Medical Real Estate?
Hospitals, urgent care centers, rehabilitation centers, and outpatient facilities are only a small part of healthcare. In addition, it includes long-term care, senior housing, dialysis clinics, and medical office buildings that provide outpatient surgery. The growing need for this multifaceted sector necessitates a wide range of investment options, all of which play a vital part in healthcare. Thus, medical real estate is a growing investment opportunity.
As a result, institutional investors and private equity firms recognized the market growth potential of this investment and have taken the lead in this new market. They have faith in the healthcare industry’s sturdiness and resiliency. However, the healthcare industry needs additional investors, and here are some reasons you should become one of them.
Reasons Why It’s a Solid Investment
The Medical Real Estate Investment Market Is Booming
The medical real estate market in the United States was worth $1 trillion in 2016, and only a small percentage of the total is held by institutional real estate funds. According to these numbers, a chasm in the market could give an exciting chance for consolidation, especially now that the public is paying more attention.
Because of the strong demographic trends and the growth potential, the initial $1 trillion might be doubled, tripled, or even quadrupled over several years.
Experts Say Healthcare Demographic Trends Will Be Strong In The Future
As our population grows older and more people develop chronic illnesses, the demand for primary care services in the healthcare industry will only rise.
Caroline Chido, Senior Vice President of Healthcare Trust of America’s Acquisitions and Development, made this statement during the 2019 Healthcare Real Estate Conference.
According to statistics, the number of Americans 65 and older is expected to double in the next 45 years, while the number of people 85 and older will triple. As people live longer, more long-term care and senior living facilities will be required. As a result, elderly Americans will be required to use healthcare facilities on a more frequent basis.
However, the British Medical Association found that 70% of primary care doctors believe their practices are too small to grow. However, 60 percent of these businesses were deemed insufficiently large to train and educate additional employees properly. Of those still waiting for investments, 52% haven’t gotten any in the last ten years.
According to this information, the healthcare industry can be a significant player in the market. Because minor players still dominate the market, you have the opportunity to benefit from it while you are still a tiny player.
According to Caddis’ CEO and partner Jason Signor, “There is a risk to this.” We need to step up our underwriting game. When it comes down to it, underwriting healthcare in real estate is all about underwriting the doctors who work in your construction.
He maintains that healthcare real estate investments are half as hazardous as those in other sectors.
It Is Predicted That Healthcare Spending Would Increase in The Years to Come
The Affordable Care Act was amended in 2010 by the Health Care and Education Reconciliation Act, making insurance coverage more widely available. In turn, this law has increased healthcare spending in the years to come since it has provided insurance to an additional 30 million Americans.
Medical expenses are on the rise as well, thanks to rising insurance coverage and longer life expectancy. It is estimated that healthcare costs in the United States will increase by 76% between 2014 and 2024, amounting to $5.4 trillion each year. It is predicted that health care spending will increase from 17.7% of GDP to 19.6% of GDP in the next ten years.
These forecasts are critical for investors, as rising healthcare costs mean more revenues for healthcare real estate. After all, the market is still based on the fundamentals you learned in kindergarten. Let’s say your estate can provide investors with more significant profits. If this is the case, you, as the owner, may be able to negotiate a higher rental fee.
Investments In Healthcare Are Long-Term
Investing in healthcare real estate has several advantages, and healthcare real estate is one of those investments that pay off in the long term. Because of the rising demand for senior housing and long-term care facilities, it doesn’t matter if the facility is mid-market or high-end. Excess yield is expected to be around 9% in the future.
What The Future Holds for Medical Real Estate
Seeing the worth of the COVID-19 epidemic, which is currently threatening the industry, it may not be as simple as it first appears. Investment and refinancing plans will undoubtedly be in the works.
Consider reaching out to Capital Q Ventures now to see how you can get into medical real estate.