OUTPATIENT DEMAND ON THE RISE

Outpatient Services demand is predicted to rise by 16% in the next decade, according to Avison Young.

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This continuous uptick in healthcare demand is a key reason that MOB (Medical Office Buildings) continues to be a terrific bet for real estate investors.

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There are multiple drivers for why outpatient demand is expected to grow… key ones include:
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• Pandemic after-effects… Many serious illness were unaddressed during the pandemic… and now need inpatient care (e.g. at hospitals)... meaning less space at hospitals for lower acuity procedures
• Health insurers… are also contributing to this trend by incentivizing low cost of care… and doing the same procedure at an outpatient facility is nearly always cheaper than doing it at a hospital
• The US population… continues to grow and also get older

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Predicting healthcare demand is historically more accurate than predicting demand in other sectors (e.g. retail)... the reason is that people don’t skimp on healthcare costs… They continue to invest even during recessions. That’s why MOBs have gained a reputation for being a recession resilient asset class.

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Healthcare real estate development has also had an uptick… but there are many reasons to believe that it will have trouble keeping up with rising demand. For one thing… construction is getting pricier and slower.  Also, much of the prime MOB real estate is clustered nearby hospitals and within quick highway access… in many locations there are powerful economic factors putting a ceiling on new, competitive MOB inventory.

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As always, successful investors need to pick the “winner” properties… as well as find additional levers to create value for investors.

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I’m confident and excited about the kinds of opportunities Alliance will continue to deliver to our investors.

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