Despite a slow 2024 in terms of sales and development, HRE professionals remain optimistic
By John B. Mugford
The multi-year slowdown in medical outpatient building (MOB) sales and new development continued in 2024, prompting many healthcare real estate (HRE) professionals to declare numerous times throughout the past 12 months: “Survive ‘til 2025.”
However, that rather bleak assessment seemed to give way to a bit more optimism as this year drew to a close. The HRE sector, especially for building owners, remains fundamentally sound, with occupancies and rental rates at record high levels. And the fundamental reason for the sector’s enduring allure, the favorable demographic trend of an aging population, will undoubtedly continue to stoke demand for even more healthcare services in the decades to come.
As those involved in the HRE sector are keenly aware, the rising costs of doing business, coupled with rising interest rates, has created a more challenging debt market. That, in turn, has had a lot to do with the slowdown during the past couple of years of both sales and development of the sector’s bread and butter product type, MOBs.
The development slowdown has been at least partly due to the financial struggles being felt by many of the nation’s health systems, especially the smaller local and regional systems, and especially since the onset and aftermath of the COVID-19 pandemic. The current situation, as many HRE and healthcare professionals have noted, can be described as one of the “haves” and the “have nots.”
Even with so many factors at play, most HRE professionals believe the sector remains a strong one with a strong future. The recent interest rates cuts initiated by the U.S. Federal Reserve Bank can only help the sector, they say, as lower and more stabilized borrowing costs will provide clarity for buyers and sellers alike, as well as health systems and development firms.
As we look back on 2024, there is no doubt that interest rates, the lending markets, and the slowdown in MOB sales and development dominated the headlines. But those weren’t the only significant news stories from the HRE sector. So here’s HREI’s annual – albeit subjective – look at the top 10 HRE stories of the past year.
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