Labor challenges, supply chain disruptions, rising costs and difficult payer relationships are putting hospital and health systems' margins under extreme pressure, forcing many organizations to look for more creative avenues to increase revenues and reduce costs.
Real estate can account for up to 40 percent of most hospital and health systems' balance sheets, according to JLL's Healthcare and Medical Office Perspective report. As margin relief becomes critical, more health systems are considering creative real estate options such as portfolio overhauls and optimizations, lease restructures, strategic location analytics and divestments of non-core assets to strengthen their bottom line.
"Facilities offer both risks and opportunities to healthcare providers, and, despite the challenges, the critical nature of healthcare and large tailwinds from a growing and aging population continue to make healthcare real estate one of the most stable asset classes for investors," Jay Johnson, national practice leader of healthcare markets at JLL, said in a Nov. 2 news release.
One key opportunity is within the medical office space, where occupancy is stronger than the commercial office sector and was significantly less disrupted by the pandemic, according to the report. Medical office asking rents have averaged 2 percent growth year over year for the past five years and reached an average $23 per square foot triple net by mid-2022.
"Medical office buildings are an attractive alternative asset class to investors during uncertain times due to their stable occupancy and durable income, offering consistent rental rates with annual growth," said Mindy Berman, senior managing director of JLL capital markets. "Medical office is a defensive investment property class in today's market due to the steady demand for healthcare services."
To read the full report, click here.