Healthcare real estate

medicine encyclopedia----Healthcare real estate

medical encyclopedia

Healthcare real estate

Children’s Rehabilitation Center in White Plains, NY located within senior living campus. Operated by Noyack Medical Partners

The landmark Williamsburg Savings Building, renovated with 200 high-end residences and offices. Brooklyn, NY Operated by Noyack Medical Partners

The St. Vincent Heart Center of Indiana operated by Bremner & Wiley

Healthcare real estate,Overview

Healthcare real estate is a niche market within the larger real estate market. Healthcare real estate or "Medical real estate" describes buildings, offices, and campuses leased to members or organizations within the healthcare community, but owned and operated by third party groups. There is a rising trend among hospitals, health care systems, and medical practitioners to embrace third party ownership and management of real estate. By using third party developers, they can preserve their capital resources for acute care needs and focus their attention on helping people, while passing on responsibility of building regulation and maintenance minutiae.

Healthcare facilities have detailed technological and regulatory requirements. Even such building maintenance tasks as cleaning, heating and cooling are done differently in health care, with demanding sterilization and filtration needs. In addition to outsourcing building and management tasks,

it's becoming increasingly attractive for hospitals to leave building ownership itself to someone else. The concept fits well with the current development trend pairing not-for-profit hospitals with for-profit physician groups as partners in new specialty facilities, such as The Heart Center of Indiana.^[1] Illinois, Texas, California and Florida accounted for a third of healthcare construction starts in 2007, though the practice of third party ownership is also rising among all metropolitan areas where space is at a premium.

From an investor viewpoint, healthcare REIT's as a group generally trade at a premium yield to other REIT categories. It is also considered one of the more stable sectors, along with higher education and government. During times of economic decline, health care real estate continues to grow.

In 2008, several factors converged to drive healthcare real estate:

• An aging population that requires ever more medical services: As of 2004, there were 36.3 million people in America 65 and older, accounting for 12% of total population. US Census projects there will be 86.7 million people 65 and older by 2050, comprising 21% of the total population.

• Advances in technology that allow increasing numbers of medical procedures to be done in offices outside of a hospital setting

• Tight medical office markets in many areas as little new construction came on line for several years

• Rapid population growth in some areas that has outstripped the supply of medical offices

• Increasing interest from investors looking to take advantage of high lease rates and a generally stable physician tenant base.
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