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The Medical Office Sector Continues to Hold Steady


The time to purchase scientific real estate is now if ever there was one. One estimate for the end of 2018 predicted that the demand for scientific office building (MOB) space would rise by 16% in the next ten years. The pandemic has now raised awareness of the need for larger scientific facilities. Primary care physicians as well as specialists who provide unique care are needed in great numbers. According to the association of American medical schools, there could be a shortage of as many as 139,000 doctors in the modern era by the year 2033. With this kind of demand for hospital care, there is also a growing demand for real estate.


The patient base of scientific groups is undergoing significant shifts, necessitating practice expansion. The Centers for Medicare and Medicaid Services predict that healthcare spending in the United States will rise by $1.09 trillion. MOBs can and should capitalize on this favorable market for current customers. However, prior to signing a medical real estate purchase agreement, there are a few things to keep in mind, as with any significant investment.


The choice between leasing a MOB and purchasing one can be a big one for any clinical practice. Some medical groups may want to avoid the risks of modern-day ownership by using leasing as an option, freeing them to relocate when their lease it up. However, owners of MOBs who purchase enjoy significant advantages. First of all, they won't have to worry about the annual rent increases that come with leasing. Physicians who own their own buildings typically also intend to remain in the same location for an extended period of time. They can get equity by selling their clinical real estate to other partners or doctors after giving up their practice.


A sale-leaseback may also be an option for owners of healthcare real estate who are in need of recent additional cash to cover debt or who require a cleaner balance sheet. In these kinds of deals, the owner can sell their assets and get money right away. Then, he or she can turn around and rent the property back from the new owners. These lease agreements typically include a long rent term of between 10 and 20 years, allowing the business to continue treating its clientele from their preferred location. This feature may also be important to keep in mind for some practices that are experiencing difficulties as a result of pandemic-induced shutdowns.


Additionally, sale-leasebacks may be advantageous to traders interested in purchasing leased space. However, a tenant should determine their long-term objectives prior to making any final decisions regarding leasing, purchasing, or engaging in sale-leaseback negotiations.

The readiness of the individual practice also plays a significant role in the timing of the purchase. Before deciding to shop, one needs to consider their financial stability. Before determining whether they are able to maintain a long-term mortgage, they must review their unique financial situation and consider speaking with a skilled healthcare real estate broker.


Keep in mind that business fees aren't always a one-time expense. The building will need to be renovated over time, whether it's for structural or aesthetic reasons. Reimbursements for renovation, rent, and real estate tax are all examples of recent items included in the occupancy price. A medical facility that views itself as a tenant of its space is able to account for the total recurring cost and how it affects the practice's budget.


Where to buy medical real estate? Between the summers of 2018 and 2019, the square footage of medical offices across the United States increased by 21 million square feet. Only ten cities keep more than 35% of the more fashionable inventory, which suggests that those markets have a strong chance of expanding. As is the case with all modern commercial real estate markets, some are more powerful than others. Markets also change, so it's important to do thorough market research before choosing a new location or building for a medical practice.


Outpatient clinics, community surgical centers, traditional hospitals, and micro-hospitals all need to look for resources that are easily accessible to the majority of their patients. Additionally, considering a network's infrastructure and expansion plans should be a consideration for clinical groups because they may also have an impact on the expansion of the scientific practice. For example, if a city plans to add more shops, trendy spots, and public transportation, the number of patients could grow as a result of increased foot traffic.


There are a few main modern medical facilities. Each type of property has a set of advantages and disadvantages that would affect a medical procedure. Medical professionals should carefully consider their options and remember which field is best suited to their institution.


Health centers are a common form for modern patient care. They offer a wide range of modern patient treatment options, and specialty medical services are all available to the patient in the same modern location. Retail medical facilities, also known as "Medtail," are empty retail spaces that have been converted into clinics or urgent care facilities.


A medical organization may want to upgrade an existing facility in the same way that it chooses the appropriate asset type and length for the new facility. For instance, older MOBs are unable to meet the most recent requirements of the Americans with Disabilities Act or the country's building codes. Although the renovations to those medical real estate properties may be well worth it, some medical businesses cannot currently afford them. You should consider the cost of modern improvements when deciding whether or not to purchase an existing medical facility.


The pandemic has given medical professionals a lot more things to think about before buying a medical space. For instance, large healthcare facilities may now need areas that can accommodate quarantine equipment. Additionally, in order to accommodate multiple requirements in a single location, certain practices may need to look for facilities with flexible space.


A long list of details includes the property search, market evaluations, location factors, and lease calculations. These are just four of the most recent topics of interest. Modern medical professionals lack the time to thoroughly review stock, manage site visits, or conduct precise negotiations with new landlords. Many choose to rely on a group of experienced CRE advisors who specialize in clinical real estate.


The healthcare field is constantly evolving. It goes without saying that medical real estate will follow. Practices will benefit from having legitimate medical real estate specialists on their side as this industry continues to boom.