Risks Reduced for Medical Real Estate
By Chris Muoio, Senior Quantitative Strategist, Ten-X Research
We noted at the beginning of the year that the new presidential administration in D.C. potentially increased risks for certain commercial real estate sectors as proposed regulatory and legislative changes could alter the growth trajectory of industries and with that the demand for certain types of commercial real estate.
One of the sector’s that faced the most acute possible changes was medical office/retail as the new administration proposed sweeping changes to healthcare legislation. Hospitals and medical offices faced the prospect of lower demand for healthcare services as the proposed legislation would have reduced the number of insured patients and the growth pace of federal spending on health care. Meanwhile, medical retail had the potential to benefit as it serves as a lower cost alternative to care in many cases and could have seen demand increase as consumers bore a higher proportion of their medical bills.
Following the withdrawal of the proposed American Health Care Act, real estate investors in the medical/healthcare space can breathe easier as it appears this risk has dissipated. The proposed legislation was scuttled late last week as it became clear it lacked the votes to pass the House. The current rhetoric out of Washington signals a desire to move off of the issue and towards other policy initiatives. Commercial real estate investors should continue to monitor the machinations in Washington carefully, as the administration could revert back to the issue at a later time, but for now it appears the existing fundamental story underlying healthcare based real estate, which has produced uninterrupted growth in health care services, should remain intact.