According to a report newly issued by Marcus & Millichap, the generational divide between boomers and millennials is making itself known now in the medical office segment of the industry—and not just because boomers are feeling their age and millennials still think they’re indestructible.
Not surprisingly, as boomers continue to age, healthcare needs will rise along with them, according to the report. But, “While the baby boomer generation has a huge impact on the current growth of the healthcare industry, the millennial generation, which has surpassed the baby boomers in size, is driving a major shift in the care delivery model and the way they approach, research and resolve issues,” M&M goes on to say.
Specifically, the millennials will pave the way for what the report calls an “emerging trend in the revitalization of healthcare,” which includes more transparency from insurance companies and providers as well as quick access to physicians, especially as it relates to costs and coverage.
So what does all of this mean to real estate? Obviously, the healthcare market, no matter the changes in delivery, is evergreen. There will be a slow demise in primary care operations and a rise in urgent/acute care centers and retail clinics, often located within pharmacies. This, says Marcus, is in the name of more efficient and affordable options.
“Large healthcare providers are acquiring and expanding services off campus and closer to residential areas, providing patients easier access to care,” says the report. “This has prompted the development of ambulatory surgery centers, stand-alone emergency rooms and large multi-tenant medical office buildings. As the way people seek medical care and how they approach changes, developers must keep up by offering flexible floorplates, convenient locations and amenities such as lean design, up-to-date technology and green building features.”
And we can see that trend already in leasing. All of the above has led to vacancies coming down more than 500 basis points in the past seven years; but note that is in new construction, which presumably follows the above-mentioned design guidelines. Rents followed, rising nationally by 3.5% over that same period.
View the full Marcus and Millichap report here.
About the Author
John Salustri is editor-in-chief of Salustri Content Solutions, Inc., a consultancy focused on enhancing the web and print content of clients around the nation. He is a regular contributor to JPM Magazine and a frequent blogger for IREM’s website. Prior to launching SCS, John was founding editor of GlobeSt.com, the industry’s premier real estate news website, where he managed the daily output of 25 international reporters, and prior to that, he was editor of Real Estate Forum Magazine. John is a four-time winner of the National Association of Real Estate Editors’ Award for Excellence in Journalism.