Demand for Healthcare Real Estate Continues to Grow

By Danny Prosky, Grubb & Ellis Equity Advisors L.L.C.

There is no doubt the REIT market has received considerable attention in recent months as investors hoping to improve returns turn their attention to commercial real estate as a way to diversify, improve yield and capitalize on the opportunistic sector.

There is no doubt the REIT market has received considerable attention in recent months as investors hoping to improve returns turn their attention to commercial real estate as a way to diversify, improve yield and capitalize on the opportunistic sector.

As the Great Recession begins its slow recovery, many healthcare REITs in particular have reportedly begun ramping up to invest. Whether non-traded or traded, healthcare REITs are seizing the opportunity to acquire property in a robust commercial real estate sector as economic and demographic trends – due mostly to rapid growth and aging of the U.S. elderly population – reinforce all indications that the industry will likely continue to expand as it has been for the past two decades. There is also data to support this belief.

According to the Bureau of Labor Statistics, the healthcare job sector is anticipated to generate 3.2 million new jobs between 2008 and 2018. That figure tops any other industry. The report also maintains that ten of the 20 fastest growing occupations are related to healthcare, and wage and salary employment in the healthcare industry is projected to increase 22 percent through 2018, compared with 11 percent for all industries combined. Another significant number is the total healthcare jobs gained in the U.S. since January 2008 has been approximately 800,000 — this employment growth despite the fact that the private sector has shed more than seven million jobs over the same time span.

In addition to the demographic wave driving continued demand growth, the recent federal healthcare reform legislation is expected to provide medical insurance to more than 30 million Americans who currently go without. Whatever your political perspective on the controversial reform, there is no disputing that it will only add to the already burgeoning demand for healthcare services, which will likely lead to ever greater demand for healthcare-related real estate.