The headwinds facing health care real estate require a nimble, innovative response
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At the intersection of health care and real estate, the landscape appears both promising and challenging for stakeholders in the industry. While the demand for health care services continues to rise, hospital systems face the financial strain of escalating labor and material costs, which have surged by 35-40% over an unprecedentedly short amount of time, along with additional increased operational expenses.
Traditionally, hospitals have relied on internal funding mechanisms; however, many hospital systems are now exploring alternative avenues, such as partnerships and collaborations with nonprofit entities and universities. Our team at Bremner Real Estate has witnessed a successful example of this partnership in Norman, Oklahoma, where we are developing a state-of-the-art cancer center for Oklahoma University Health and Norman Regional Health System. We’ve seen many benefits to these partnerships including patient access to clinical trials and collaborations that facilitate a seamless flow of information between researchers, educators and health care providers.
Ambulatory care centers, outpatient facilities and specialty centers of excellence (cancer, orthopedics, women’s health) are also gaining traction. During the COVID-19 pandemic, we saw hospital overcrowding which resulted too often in patients being turned away. The modern health care hubs now being created offer a blend of inpatient and outpatient care which enhances patient accessibility. For real estate developers, this trend underscores the need to be flexible and adaptive when designing for health care systems whose strategies may deviate from traditional models.
A relationship-oriented approach to health care real estate may be more important than ever as we examine these evolving industry trends. In fact, smaller boutique teams have a significant advantage in today’s marketplace; we can be nimble and adapt to changes quickly whereas individuals in larger corporate settings may find themselves constrained by bureaucratic red tape.
Health care real estate companies must embrace this important distinction in services and offer a customized approach that aligns with each client’s unique needs. While many companies may have traditionally operated as an owner/developer, overseeing projects from design development through construction completion, it is important to recognize that this comprehensive approach may not suit every client’s needs or growth strategy. So, when necessary, it is helpful to also assume the role of consultant, providing targeted oversight rather than an all-encompassing approach.
The headwinds facing the health care real estate industry mirror those in various sectors – dynamic interest rates, escalating costs and rapid technological advancements. We eagerly anticipate navigating these shifts by embracing a flexible, relationship-oriented and innovative approach tailored to the needs of each one of our clients.