Development surpassed pre-pandemic levels in 2022
By Murray W. Wolf
HRE developers are hoping they’ll be seeing more scenes like this Oct. 20, 2022, topping out ceremony for PMB’s 137,000 square foot Helen Caloggero Women’s & Family Center on the campus of Providence St. Joseph Hospital in Orange, Calif. (Photo courtesy of PMB)
The year 2022 was a challenging one for healthcare real estate (HRE) developers. Steadily rising construction costs and inflation made construction more expensive.
Rising interest rates also made debt more expensive – or unavailable altogether as some lenders “put down their pencils” for a time. Yet tenants generally weren’t willing or able to pick up the slack by paying higher rents, as 2022 was the worst year financially for hospitals and health systems since the pandemic began, with half of U.S. hospitals finishing the year in the red, according to a Kaufman Hall study.
So the result was obvious: HRE development volume was down sharply in 2022, right?
Wrong. According to Revista’s newly released Outpatient Real Estate Development Report, total 2022 development volume was nearly flat – down only 1.1 percent. Overall development including both third-party and self-developed projects was 44.9 million square feet started or completed in 2022, compared with 45.4 million started or completed in 2021.
“The strength of construction starts was a bit surprising,” says Stephen Lindsey, a Revista research analyst. “After the drop in 2020, construction starts have surpassed pre-pandemic levels. With all the economic uncertainty, I would have expected to see a bit of a slowdown.”
Revista, an Arnold, Md.-based firm that specializes in research for the HRE and life sciences real estate (LSRE) sectors, considers outpatient space to include medical office buildings (MOBs), as well as general office buildings and retail centers with a significant amount of medical occupancy.
As noted, Revista’s annual survey found
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