There's no shortage of buzz or concern on how commercial real estate is trending these days.

If you're a healthcare real estate admin or manager, however, the future seems to be looking up. 

Real estate investment trusts (REITs) made a significant surge in healthcare property spending last year as they've noticed a trend that's been getting plenty of buzz in the news lately: the aging baby boomer population and their dependence on modern medical care.

Informally known as "the grey tsunami", this is driven by the U.S. Census Bureau prediction that 73 million baby boomers will be over 65 by 2030, with 10,000 boomers reaching this milestone daily. Additionally, longer life spans and historically low birth rates are expected to shift the age balance, with older adults projected to outnumber those under 18 by 2034 for the first time in U.S. history.

Accordingly, REITs shifted their late 2023 focus toward segments with strong income growth, particularly in healthcare properties. The sector saw a 7.6% increase in same-store net operating income growth from the fourth quarter of 2022, attracting almost $2 billion in net healthcare property acquisitions in the year's final quarter.

Most noteworthy of all, this spending is being driven by five specific trends  that paint the picture of an industry trying to answer this so-called tsunami with modern, sustainable practices.

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Demand for Flexible and Adaptive Spaces

As the healthcare industry evolves, the demand for flexible and adaptive spaces is becoming increasingly important. Healthcare providers and real estate stakeholders must collaborate to create spaces that not only meet current needs but also anticipate future requirements. The unpredictability of healthcare demand necessitates real estate solutions that can adapt quickly and efficiently.

The COVID-19 pandemic highlighted the need for flexible healthcare spaces. Hospitals faced significant challenges in accommodating patients due to fluctuating patient volumes. This experience underscored the importance of modular designs, movable walls, and multipurpose spaces. Modular construction, in particular, offers a rapid response to changing needs, allowing healthcare facilities to transform spaces with minimal disruption.

An example of this approach is M Health Fairview in Minneapolis-St. Paul, which uses a modular, prebuilt space to accommodate short stay and observation beds. This flexible design enables the hospital to repurpose the unit as needs change, demonstrating the value of adaptable healthcare real estate.

The Rise of Medical Coworking: A Disruptive Trend

Medical coworking is emerging as a disruptive trend in healthcare real estate. Borrowing from the coworking model popularized in traditional office spaces, medical coworking offers healthcare professionals a flexible alternative to conventional clinic settings. These spaces are designed to provide on-demand access to office or clinical environments, equipped with state-of-the-art facilities and medical equipment.

Medical coworking spaces cater to independent practices, physicians, therapists, entrepreneurs, and researchers. By sharing space without sharing their core business, these professionals can reduce costs and benefit from modern, well-equipped environments. Examples of medical coworking spaces include ShareMD Suites, Clinicube, and MedCoShare, which offer memberships for booking consult rooms and procedure suites.

This trend not only provides flexibility but also fosters a collaborative environment where healthcare professionals can network and share resources. As the demand for adaptable and efficient healthcare spaces grows, medical coworking is poised to become a significant component of the healthcare real estate landscape.

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Growth of Ambulatory Surgery Centers

The shift towards outpatient care has led to a surge in ambulatory surgery centers (ASCs). Hospitals and health systems are increasingly investing in these centers, which are often located away from main hospital campuses. ASCs offer numerous benefits, including shorter wait times, lower costs, and the convenience of same-day surgery.

According to the Ambulatory Surgery Center Association, more than 80% of surgeries in the U.S. are now performed in outpatient settings. This trend is driving the development of more freestanding surgical centers equipped with state-of-the-art operating rooms, recovery spaces, and rehabilitation facilities. The number of ASCs is projected to increase significantly over the next decade, reflecting the growing demand for outpatient surgical care.

ASCs are also expanding their scope of services to include more complex procedures that were traditionally performed in hospitals. This expansion is driven by advancements in medical technology and a focus on providing efficient, patient-centered care. As the healthcare delivery model continues to evolve, ASCs will play a crucial role in meeting the demand for accessible and cost-effective surgical care.

Embracing Eco-Friendly and Sustainable Practices

Sustainability is becoming a key focus in healthcare real estate, with organizations emphasizing green building practices and energy-efficient technologies. Health systems are increasingly adopting LEED-certified buildings, integrating renewable energy sources, and implementing waste-reduction strategies to achieve carbon-neutral goals.

In addition to environmental sustainability, there is a growing emphasis on designing healthcare spaces that support mental wellness and reduce employee burnout. Creating healing environments that go beyond traditional clinical settings can help attract, retain, and support medical staff. Incorporating nature-inspired designs, wellness rooms, meditation spaces, sleep pods, and collaboration areas into healthcare facilities can enhance the well-being of healthcare professionals and improve patient outcomes.

These sustainable practices not only benefit the environment but also contribute to the overall effectiveness and appeal of healthcare facilities. As the industry continues to prioritize sustainability, healthcare real estate will play a pivotal role in promoting eco-friendly practices and supporting the mental and physical well-being of both patients and staff.

Expansion of Behavioral Health Clinics

The demand for behavioral health services, including mental health, substance abuse, and developmental disorders, is surging across the U.S. Increased federal funding for behavioral health services is driving the robust expansion of mental healthcare clinics nationwide. This trend is creating significant opportunities for healthcare real estate, as the need for specialized facilities continues to grow.

The COVID-19 pandemic intensified the challenges associated with behavioral health, exacerbating issues such as self-isolation and emotional distress. This has led to a sharp increase in the demand for mental health services, highlighting the importance of accessible and well-equipped behavioral health clinics.

Managing Complex Healthcare Real Estate Portfolios

As healthcare real estate portfolios grow in complexity, admins must ensure that their lease administration solutions empower them to support their current holdings as well as the rapid growth to come. As coworking and providers subleasing space within their buildings become part of their operations, they'll need tools powerful and flexible enough to keep up with the complex hierarchy of leases, subleases and critical dates each of them will face.