Uncertainty Surrounding Obamacare Repeal Reigns In Healthcare Real Estate
The healthcare real estate market finished out 2016 strong, with vacancy rates hitting an all-time low and absorption at levels not seen since prior to the recession, according to Colliers International.
One factor driving medical office building demand is millions of Americans who now have access to healthcare through the Affordable Care Act, Colliers national director of healthcare services Mary Beth Kuzmanovich said. But uncertainties surrounding the new administration’s push to repeal the law have resulted in many providers delaying plans to expand or move until they know what the replacement to the ACA will be.
“The impact of the repeal would be 21 million people losing their healthcare insurance coverage,” Kuzmanovich said. “I think the federal government will be very challenged to simply repeal without a replacement … but the impact of the repeal can only be considered when you know what the replacement will be, and right now the impact is the uncertainty. It’s creating hesitancy in the marketplace for healthcare systems to commit and make decisions until they have some clarity.”
Meanwhile, healthcare providers are receiving less money from insurers and their costs are rising. As of 2016, healthcare expenditures per capita exceeded $10k and Colliers expects that will increase by an annual rate of 5.8%. To balance it out, systems are trying to trim construction costs, labor materials and services offered to keep expenses down.
Between the uncertainty and budgetary issues, this will be a challenging year despite record occupancy, Colliers reports.
But Kuzmanovich reassured the industry that no matter what becomes of the ACA, demand for medical office buildings will remain robust as Baby Boomers continue to age and healthcare real estate increasingly expands into retail space and new markets to be closer to patients.
“I think 2017 will see a heavy demand from investors and will continue to see a shortage of supply in the marketplace for medical office real estate,” Kuzmanovich said.