Investing in Medical Real Estate
Although the people from the outside world wouldn’t notice any difference, professionals working inside the real estate industry know that this sector is in a state of constant motion. The ones with more experience are even able to interpret the contemporary social movements to predict the rise of promising real estate niches.
For example, it is hard to ignore the impact of COVID-19 outbreak is having on our society. At the moment, the need for additional medical care service is more than evident, but the effects of the outbreak have not been immediate. On the bright side, health awareness is higher than ever, the demand for medical practitioners is on the rise and the pandemic has exposed the weaknesses of the contemporary medical facilities.
All these things ought to cause shuffles in the real estate market where new medical professionals will try to move to new premises better suited to post-COVID-19 world. But, what makes a good medical facility, and what are the things you should consider before investing in one? That is what we are going to find out here.
The location is the key
Everyone with any experience in the real estate market knows the value of a good location. The properties can feature all amenities in existence, but if they are too remote, cut off from major traffic lines and hard to access, their price will never grow past some fixed ceiling value. Medical facilities are not that different.
Although medical specialists can expect their clients to make short trips to get the necessary treatment, their goal should be neighborhoods with a high living standard and locations that are easy to access by elderly citizens. You, as an investor, should follow in the same footsteps.
Also, you have to take into consideration possible retirement migrations. Some of the sunbelt states like Arizona, Florida, and California, or high-living-standard cities like Milwaukee, Atlanta, New York, and Chicago are considered to be preferable retirement locations.
The goals of every real estate investor, regardless of niche, were always high credit tenants and long-term leases. The governmental subsidies can be considered an external factor with great influence over this matter. Even when they are not directly concerned with the rental issues (e.g., the incentives for installing electronic health records), the fact remains that various measures aimed at improving the national medical service are helping newly-found businesses to overcome some of the financial challenges in healthcare.
Has the facility been recently updated?
The things in the medical industry tend to move pretty fast, and the fact that some property was built as a medical facility a couple of decades ago doesn’t mean much in the modern world driven by its own necessities.
For instance, the current COVID-19 situation dictates that medical facilities feature cleanrooms that protect the patients with compromised immune systems. Adapting the existing rooms for this purpose requires updates like safe environment lighting fixtures. In the case of ISO class 5 cleanrooms, you may even need full ceiling coverage.
The aspiring medical specialists want to be able to run their facilities with as little additional investment as possible, and that is perfectly understandable. Renting the facility that is not in accordance with modern standards would set them behind the competition from the get-go. Therefore, updated and eco-friendly facilities should be your priority as well.
These positive circumstances were compromised at the start of the COVID-19 outbreak, and medical specialists worked with very limited resources, but the government is slowly catching up with the measures, and the things are slowly falling back in line.
Because of that, medical specialists have a somewhat easier job with monthly budgeting, and they can allocate more money toward the rents. Pay attention to these measures, especially at the state and municipality level. They can make all the difference in the world when it comes to tenant retention.
Size does matter
Of course, when we talk about size, we don’t necessarily mean the size of the very facility. This makes dealing with medical facilities slightly different from investing in other commercial properties where more square footage usually translates to a bigger profit. Some smaller practices (e.g., dentist offices) don’t require that much square footage to allow the business owners to ensure a good turnaround.
Still, what all medical practices have in common, though, is the need for:
- Spacious corridors
- Lab facilities
- Comfortable waiting area
- Ample parking spaces
You should pay very strong attention to all these features when scouting for your future investment. Also, keep in mind that some properties may not feature all of them from the get-go but can be easily adapted with modest investments (especially in the case of lab facilities and waiting areas). So, don’t write off promising properties based on these merits alone.
Pay attention to versatility
Finally, we have to quickly cover one more common real estate rule that applies to medical facilities as well. We are, of course, talking about versatility. Opting for this type of investment, in spite of various benefits that come alongside, is niche enough in itself. There is no need to cut your tenant pool even further by choosing the properties that can serve only one specific purpose.
Your goal, therefore, should be properties that feature practice-agnostic exam and procedure rooms or at least prefabricated modular design that will keep the cost of eventual adaptations on the bare minimum.
If you are investing in a facility that is yet to be built, the combination of traditional space planning and modular construction methods are definitely an approach you should try out.
We hope these five considerations will help you to find an investment that will make a worthwhile addition to your portfolio. Judging by the social development, we notice everywhere around us the medical industry will experience a steady rise in the following decades, and all these newly-found practices will need dedicated facilities to get going. This makes an excellent opportunity for investment. Putting a priority on the features that truly matter can only help your efforts.