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Commercial Real Estate

How Healthcare Reform Affects Commercial Real Esate

Posted by Kevin Endres - Apr 08, 2010

Outpatient facilities provide investors with great opportunities for reliable returns.

Prior to the passage of the healthcare reform investors began injecting capital into the medical real estate market. Outpatient facilities in particular are getting special treatment from investors due to growing demand for alternatives to traditional hospital care.

Some studies indicate that most hospital systems today provide 60% of their treatments on an inpatient basis and 40% as ambulatory care, or outpatient treatments. But that ratio is changing. Many believe that over the next five years, those percentages are going to be reversed. The demand for outpatient services and buildings where those services are offered will mushroom as the large population of Baby Boomers age and require more medical attention and treatments.Now that the health care reform has been signed into law the medical industry has gained a sense of certainty regarding the need to expand. A real estate formula for calculating medical space indicates that a health care system requires about 1.9 square feet of medical office space per patient. With the healthcare reform it is estimated that 32 million people will be added to the ranks of insured, which equates to a potential demand for 64 million square feet of additional medical space.

While demand for space will increase we suggest that investment criteria for the health care sector won’t change. Perhaps the initial prudent investment will be to invest in existing medical properties that have vacancy and arrange advantageous financing. The anticipated increased demand will fill the vacancy and foster the growth of successful investments. If you wish to discuss investment possibilities please contact Three West LLC and discover the possibilities at Cooper Ridge, Traverse City's most prominent medical office campus.

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