Hospital systems in Atlanta are expanding their real estate to reach more patients, even as rising construction costs and elevated interest rates make financing more difficult.
Piedmont Healthcare last month said it plans to invest nearly $600M to build a new relocation hospital in the metro area, a project that would be the healthcare giant’s second-largest capital outlay in its history.
In August, Atrium Health, along with Morehouse School of Medicine, got approval for a $700M teaching hospital and care network designed to serve Central and South Fulton County communities.
“Our goal is to be at everybody’s front door,” Keishia Niblack, director of real estate at Piedmont Healthcare, said at Bisnow’s Atlanta Healthcare Conference this week. “Our goal is to focus a lot on making sure that our community can stay in their community, and they don't have to drive an hour or two to get to actual top-quality care.”
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She said she expects Piedmont and other healthcare systems to focus on hyperlocalized outpatient and medical centers within 5 miles of residential communities in Metro Atlanta.
The growing aging population in the U.S. is forcing healthcare systems to rely more heavily on outpatient care, driving a need to build more facilities, panelists said at The Carlyle. Healthcare systems generally spend less per patient for care at outpatient facilities than in-hospital stays.
But health systems are having to navigate spiking debt and construction costs as well as cuts to federal reimbursements.
Hospital systems are also tallying lower profit margins as operating costs rise over the past year, according to data from Strata Decision Technology. Operating margins were 1% to 1.5% in the second half of last year but turned negative in the first quarter of 2026. They turned positive in March, according to Strata, reaching 0.7% by June.
New medical office building deliveries are expected to drop 26% in 2026, to the lowest level in more than a decade, according to CBRE. But spending on hospital and clinic construction is expected to jump 11.6% to $30.7B this year compared to 2025, the Healthcare Financial Management Association reports.
The cost to develop hospitals and medical facilities averaged a little more than $370 per SF in 2020, according to the RS Means Data construction costs estimator. By 2026, costs ranged from $439 to nearly $455 per SF, according to RS Means.
Costs are making it difficult for developers to find medical operators willing to pay the rents needed to justify new construction, said David Martin, executive vice president of Remedy Medical Properties.
“It’s a tough, tough environment to deliver a new medical office building today,” Martin said, adding that the delta between existing medical office rents nationally and rents needed to fill newly delivered space is nearly $10 per SF.
New technology is also pushing up infrastructure costs for medical offices and hospitals, including dynamic wayfinding signage, McCarthy Building Cos. Project Director Kyle Orr said. That’s making it harder for healthcare systems to draw a profit on new developments.
“Just because you build a brand-new medical office building in the fastest-growing submarket of Atlanta, it doesn't guarantee a profitable venture,” Martin said.
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