• .
    .

Thought Leaders: Three ways the COVID-19 pandemic has impacted healthcare real estate

By Chad DeRossett

The COVID-19 pandemic has made an indelible mark on the real estate industry, and healthcare real estate has particularly had to pivot to cater to a landscape that in some ways, has been fundamentally altered.

Three trends that have emerged from the pandemic’s effect on the industry include:

1) Behavioral health is seeing more favor from landlords and operators

Behavioral health outpatient care increased 27 percent compared to pre-pandemic levels, according to a March 2021 report from Cigna, causing an unprecedented demand for services. This influx in patients is likely due to the prolonged periods of isolation and stress brought on by the pandemic, coupled with the fact that conversations surrounding mental health have increasingly become more commonplace, reducing the stigma that historically hindered the number of patients seeking treatment.

While the pandemic opened access to more virtual-based services, the increase in the number of patients seeking treatment has caused behavioral health companies to occupy more real estate. Long-term inpatient facilities – a sector of residential treatment that doesn’t provide virtual services – are expanding nationally to accommodate this need. Private equity firms have also recently entered this market having been involved in 20 of the 27 behavioral health mergers and acquisitions that occurred in 2020.

.

2) Medical office designs may be forever changed by COVID-19

Changes to medical office layouts are already beginning to take place as offices reopen and prepare to accommodate patients. Post-pandemic layouts that promote physical distance among visitors and staff will become commonplace, and virtual check-ins at kiosks or online will likely replace the pre-pandemic tradition of having patients check in face-to-face with an administrator.

Regarding construction, larger reception areas, medical rooms and spacious hallways will also be introduced to encourage physical distance among passersby and limit potential for infection. New developments will likely require stronger HVAC filtration systems and a comprehensive janitorial process to ensure full sanitation – undertakings that will likely increase operating costs.

Preparing tenants for these changes and how they will impact daily operations is the best course of action operators and landlords can take to help introduce these new protocols to patients.

3) Medical space occupancy continues to rise

Convenience and access are driving investments in outpatient clinics, as access to healthcare has become more of a priority for patients. While the pandemic has exacerbated the need for better access, this trend was thriving pre-pandemic, as a 2018 report from CBRE showed the number of outpatient clinics had increased 51% between 2005 and 2016.

At the same time, medical offices are increasing in size, as a larger square footage allows for more specialty services. When the pandemic limited travel and access to hospital systems to care for COVID-positive patients, it heightened this need for better access to full-service and specialty services. Healthcare real estate specialists can expect this need to become a long-term strategic move for larger health facilities looking to expand their outpatient footprint.

Nearly two years since the pandemic began, it’s become even more apparent that the impacts of COVID-19 on the real estate industry will have a longer effect than initially thought. Other trends in addition to these three are likely to emerge as the world continues to work towards a post-pandemic environment where mitigating the spread of infections is priority.

Even after the pandemic has dissipated to some degrees, it is highly possible these trends may continue to accelerate, and planning for them should be a key component of any healthcare real estate strategy.

Chad DeRossett, CCIM, is Director of Brokerage Services, Nashville at Holladay Properties. He has been a valued member of Holladay Properties’ Nashville office since 2003 and has 18 years of experience in market analysis along with leasing and brokerage. He is part of a brokerage team that has participated in more than 1,000 transactions valued at more than $250 million dollars over the past 14 years, and continues to be the Middle Tennessee Market leader for Healthcare Brokerage. 

The full content of this article is only available to paid subscribers. If you are an active subscriber, please log in. To subscribe, please click here: SUBSCRIBE

Existing Users Log In