July 17, 2020 Comments Off on How the Pandemic Will Impact Healthcare Real Estate Views: 926 National News

How the Pandemic Will Impact Healthcare Real Estate

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An increased emphasis on locating within retail properties is only one of the impacts that the COVID-19 pandemic has made on healthcare real estate. JLL’s new Healthcare Real Estate Outlook report outlines three key concepts for occupiers and investors to keep in mind. They include the following:

Advances in telehealth will reinforce rather than replace on-site care.

JLL says that as medical technology continues to rapidly advance, an increasingly sophisticated suite of wearables and robotic telemedicine carts will enhance home monitoring and management, enhancing telehealth’s capabilities. The increasing demand will carry over to on-site services as well, as more frequent systematic touchpoints will produce more live-care follow-up appointments.

“COVID has shifted the paradigm, but the idea of telehealth replacing in-person, on-site care is probably overstated,” said Jay Johnson, national director, JLL Healthcare Markets. “Telehealth will displace some on-site care, but it will also expand access to treatment that might not have otherwise occurred, and much of that will involve a live-care component with a visit to a healthcare facility. The focus should be on adapting real estate to new modes of care delivery.”

COVID-19 will accelerate segmentation of wellness and acute care in real estate.

The pandemic has increased the need for higher-acuity space within hospitals and simultaneously accentuated the existing migration of lower-acuity space into alternative locations. An increase is expected in off-campus facilities that emphasize wellness, prevention and a healthy lifestyle, all of which feature lower acuity and lower system-wide costs.

With both destination and neighborhood shopping center availability on the rise, along with affordability, healthcare tenants are increasingly locating within retail properties to benefit from foot traffic and accessibility.

“Future success for hospitals means embracing this shift to higher-acuity care to also appease consumer concern about safety within hospital facilities,” said Richard Taylor, divisional president, JLL Healthcare Solutions.

• Medical office facilities and investment will benefit in a post-COVID-19 environment.

Since the 2008 recession, occupancy within the 1.5 billion square feet of medical office space has been remarkably consistent, fluctuating within a narrow range of 91% and 93%. Accordingly, JLL says the medical office investment thesis is strong and sound, offering long-term leases, stable occupancy and income, strong tenant credit quality, and tenant retention.

“While many clinical operations were reduced or shuttered during COVID-19, tenants continued to pay rent,” said Audrey Symes, research director, JLL Healthcare and Life Sciences. “Rent collections by the largest owners of medical office space were consistently noted in the high 90% range throughout the lockdown period, with limited rent deferment and relief required.”

As a result of the growing investor interest, typical medical office sales volumes per year have more than doubled, from $6.8 billion in 2012 to $14.7 billion by 2017, JLL says.

“Two-thirds of medical office square footage is owned by health systems and physicians with strong access to capital,” said Mindy Berman, managing director, JLL Healthcare Capital Markets. “Large investment opportunities are likely to present themselves as COVID-19 steepens the differentiation in health system resources.”

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