Healthcare Shifts Driving Demand For Outpatient Facilities In Denver

Outpatient care in Denver is outpacing other healthcare sectors, driving demand for the facilities where providers offer that kind of care, according to panelists at Bisnow’s Denver Healthcare Summit on Dec. 4.

Technological advancements, patient demand for convenience and cost efficiencies are reshaping Denver’s healthcare real estate landscape, with outpatient facilities taking center stage. 

“If you look at forecasts over the next five years, inpatient growth is forecasted to decrease by 0.7% nationally. Outpatient growth is forecasted to grow by 10%,” NexCore Group Senior Vice President Tom Kelly said at the event, held at the Four Seasons Hotel Denver.

Denver’s outpatient real estate market is characterized by tight availability and steady demand. As of the first quarter, the direct vacancy rate for outpatient medical buildings was 6.2%, according to CBRE data. Aurora and southeast Denver led absorption rates, with 21K SF and 17K SF of net absorption, respectively.

Meanwhile, rents have stayed elevated. Average direct asking rents for outpatient facilities reached $32.70 per SF in Q1, with Cherry Creek commanding the highest rates at $48.45 per SF.

“It’s a good market to be in compared to the office market,” Kelly said, noting a shift in industry jargon as players begin referring to “medical outpatient buildings” instead of “medical office buildings.”

“You’re seeing capital really starting to, I want to say, flood into the space and looking at this as not a secondary or tertiary investment product but a very stable, long-term investment. You’ve got good-credit tenants, and healthcare is not going away. It's always going to grow.”

Private equity dealmaking in healthcare services has slowed significantly since its 2021 peak, with 148 deals closed or announced in Q3, according to PitchBook’s Healthcare Services PE Update. This marks a 15% decline in total deal volume compared to last year, as firms contend with high interest rates, labor costs and regulatory scrutiny.

But outpatient care remains a bright spot. PitchBook reported growing investor interest in medical spa and outpatient mental healthcare deals, while panelists at the event emphasized the stability and growth potential of ambulatory surgery centers and behavioral health facilities.

Behavioral health facilities, a subcategory of outpatient care, are attracting attention due to regulatory changes and funding opportunities, including opioid settlement funds.

Initium Health principal James Corbett highlighted how smaller, community-focused crisis care facilities are transforming the behavioral health landscape.

“The opioid settlement funds are creating unprecedented opportunities for community-driven behavioral health facilities,” Corbett said. “Colorado has $787M coming in opioid settlement funding, and a lot of that should be going to the built environment.”

Ambulatory surgery centers are also driving growth, with advancements in technology enabling procedures like full bone and joint replacements in outpatient settings.

“Five to 10 years ago, if you had a hip replacement or knee replacement, you're going to a hospital — you're probably going to stay a night or two, maybe three if you've got some comorbidities. Now, a lot of that could be done in an outpatient setting,” said Scott Peek, president of Front Range Market and St. Joseph Hospital at Intermountain Healthcare.

Denver developers face hurdles in accelerating outpatient projects to market, however. 

“One of the themes that we've seen in our healthcare world is that speed-to-market approaches are very in vogue,” Martin/Martin Consulting Engineers associate Michael Renes said.

That could mean reducing a 12-month delivery to nine months or a 36-month construction schedule to 32, he said, compressing the entire process to save money.

“There's a lot of benefits, but in that lens, when we get involved with a really heavy speed-to-market approach, there's some risk and there's some things that you have to look out for,” Renes said. “If you go too fast, you lose some abilities. You could potentially be designing things that are no longer in parallel — they're out of whack, and so basically you could be at risk for rework.”

All of the panelists said collaboration is critical. 

“You need everyone at the table from the start — developers, contractors, clinicians — to ensure projects meet both immediate and long-term needs,” said Cherie Dice, health principal at architecture, engineering, environmental and construction services consulting firm HDR.

The continued growth of outpatient care will require innovative real estate solutions, panelists said, as healthcare systems compete to capture market share in Denver’s dynamic market.

“We’re seeing a fundamental shift in how care is delivered, driven by technology and patient demand,” Kelly said. “It’s changing everything about where we build and how we plan for future needs.”