The COVID-19 pandemic has got the public to focus on the healthcare sector, leading the investors to eye on healthcare real estate investment.
The healthcare sector has been under the limelight ever since. Its operations constantly reach stakeholder demand, employees demanding a safer workplace, and logistical competencies being tested every day.
Healthcare is not only limited to hospitals, urgent care facilities, and rehab and outpatient facilities. It also covers ambulatory surgery centers, long-term care, senior housing, dialysis clinics, and even medical office buildings. This increasing demand for this multi-faceted sector calls for a wide array of investment opportunities that provides a significant role in the playing field of healthcare.
Thus, institutional funds and equity companies saw the potential market growth of this investment and have been the leading active players in this new market. They believe in the robust and resilient characteristics of the healthcare sector. They are looking forward to its role in the market, but the healthcare sector needs more investors, and here are reasons why you should be one.
THE HEALTHCARE REAL ESTATE INVESTMENT MARKET IS THRIVING
In 2016, the U.S. market healthcare real estate was sized at $1 trillion. And public Real Estate Investment Trusts (REITs) only account for 17% of the said amount. This data shows how extremely divided the market is right now, which can provide an engrossing opportunity to convert it into something more homogeneous now that the public watches it more.
This growth potential, partnered with the strong demographic trends, would allow this initial $1 trillion to double, triple, or even quadruple in the next few years.
EXPERTS SEE STRONG DEMOGRAPHIC TRENDS IN HEALTHCARE
With our population constantly aging and more people are suffering from chronic illnesses, the primary care services of the healthcare sector are set to increase in terms of demand.
During the Healthcare Real Estate Conference in 2019, Senior Vice President of Acquisitions and Development of Healthcare Trust of America Inc. Caroline Chido quotes that “Not only are people getting older, but they are living longer.”
Data show that for the next 45 years, the American population of 65 years old and above is foreseen to double, while the older population of 85-year-olds and above is projected to triple. This trend of a higher life expectancy will need more long-term care and senior housing facilities. In addition, older Americans will have to visit healthcare facilities more than they will do these days.
Meanwhile, according to a survey conducted by The British Medical Association, 70% of primary care general practitioners deem their establishments too small to expand. At the same time, 60% of these establishments were said to be too small to train and educate more staff. And 52% have not received investments for the last ten years.
This data shows that the healthcare sector would have the potential to be a primary market player if given a chance. Since there are still only minor players in the market, you can take advantage of it while still not a significant market player.
As stated by the Chief Executive Officer and a partner of Caddis Jason Signor, “There is a risk. We have to get more aggressive in our underwriting. At the end of the day, underwriting real estate healthcare is about underwriting the group of doctors that is in your building.”
He continues to say that healthcare real estate investments are 50% less risky than other real estate sectors.
HIGHER HEALTHCARE SPENDING IS EXPECTED IN THE FOLLOWING YEARS
With the Health Care and Education Reconciliation Act amending the Affordable Care Act in 2010, more U.S. citizens can now have access to insurances. This law has allowed 30 million Americans to have insurance, thus, making healthcare spending rise in the succeeding years.
Due to the increased insurance coverage and the increased life expectancy, medical expenses also tend to grow higher. In fact, U.S. healthcare expenses are expected to increase by almost 76%, which equals $5.4 trillion yearly from 2014 to 2024. By these ten years, the GDP (Gross Domestic Product) percentage spent on health care is also projected to escalate from 17.7% to 19.6%.
These projections are essential tools for investors as increased health care spending means healthcare real estate bringing high revenue. After all, the market still relies on the basics. Suppose your estate can make higher returns for the stakeholders. In that case, you, as the owner, could also demand higher rent for your property.
HEALTHCARE REAL ESTATE INVESTMENT IS A SMART INVESTMENT
When you venture into healthcare real estate, you can expand beyond the borders. For example, Welltower, the leading REIT company for healthcare, has developed in the U.K. and Canada. The thing is, both countries were new to REITs. Because of this, they have expanded at 41% in the U.K. and 60% in Canada, without breaking the bank.
Also, suppose you are the only one in the market. In that case, you are holding the revenues solo, or you are way ahead of competitors. You can turn a property into a more modern facility located in wealthy areas of the country to maximize dividends and incomes.
With this smart investment strategy plus the continuously aging population, what more could you ask for if you get high revenue at a growing rate every year?
HEALTHCARE INVESTMENTS ARE FOR THE LONG RUN
Suppose you ask a health care real estate advisor. In that case, they will tell you one benefit of investing in Health care real estate. And that is healthcare real estate being an investment that is definitely for the long run.
In the U.K. alone, newer care facilities are securely leased for more than 25 years with high rental value. Whether it is a mid-market facility or a high-end one, they still attract greater yields because of the increasing demand for senior housing and long-term care facilities. They are projected to have a 9.00% excess yield in the coming years.
WHAT’S IN IT FOR HEALTHCARE REAL ESTATE IN THE FUTURE
With the COVID-19 pandemic currently challenging the sector, it may not seem easy to start seeing its value. However, once we are back on track and everything is back to normal, investment and refinancing plans will surely be on their way.
While the healthcare sector is busy rolling out vaccines and housing millions of COVID-19 patients, why not consult a healthcare real estate advisor now? These advisors from REIT companies may provide you opportunities that will indeed thrive in the following decades.
Zeustra can guide you in your healthcare real estate investment journey. They can partner you with global strategic healthcare real estate advisors who can walk you through the process of healthcare REITs smoothly.