Insights from GlobeSt.com’s HEALTHCARE 2024 Event
On December 3, 2024, I had the pleasure of attending GlobeSt.com’s HEALTHCARE 2024 in Scottsdale, Arizona. This one-day event offered a packed schedule of informative panel discussions and expert insights on the healthcare real estate market. While networking was part of the day, the emphasis was clearly on gaining a better understanding of the industry’s current state and its future trajectory. Here are my key takeaways from the event.
Keynote: A Year in Review and Forecasting for 2025
The day began with a compelling keynote by John T. Chang, SVP at Marcus & Millichap, titled “A Year in Review and Forecasting for 2025.” His insights painted a cautiously optimistic picture of what lies ahead:
- Economic Forecast: The Federal Reserve faces significant challenges, but 2% GDP growth in 2025 seems achievable despite ongoing efforts to control inflation. Final jobs data for 2024 is expected to show approximately 2 million new jobs.
- Policy Impacts: Proposed mass deportations, stricter immigration policies, and tariffs on imports from China, Mexico, and Canada could increase construction costs—a concern for the healthcare sector.
- Regional Growth: Southern and Southeastern states are expected to lead the nation in job growth, making them key areas for healthcare development.
- Healthcare Resilience: With 11,000 people in the U.S. turning 65 each day, demand for healthcare services continues to grow. Healthcare jobs account for 40% of national job growth, with outpatient and medical office buildings (MOBs) as the fastest-growing development segments.
Key Sessions and Insights
State of the Industry
This session provided an in-depth look at economic trends and their implications for healthcare development:
- Interest Rates: Significant rate cuts are unlikely in 2025 though a 50 basis point cut by June of 2025 appears to be realistic
- Recovery Trends: Only about a third of healthcare systems have fully recovered from the pandemic, with operating margins at or above 4%—a benchmark for reinvestment.
- Development Trends: Smaller facilities with lower bed counts are becoming popular due to their cost-effectiveness and the ability to perform more outpatient procedures. Micro-hospitals and surgical centers stand out as marketable assets.
Healthcare Systems’ Perspective
This panel, moderated by Murray Wolf of Healthcare Real Estate Insights, shed light on the criteria driving healthcare expansion:
- Data-Driven Decisions: Key factors for targeting growth areas include population age, projected growth, and specific healthcare needs.
- Retail-ization of Healthcare: There’s a shift toward meeting patients where they are, consolidating services into outpatient surgical facilities and retail-oriented locations.
Capital and Lending Resources
This session covered the financial aspects of healthcare development, offering a cautiously optimistic view:
- Financing Trends: Lending rates may dip into the 5% range by Q3 2025, but developers are advised to avoid speculative projects or rural markets with populations under 300,000.
- Pre-Leasing Strategy: Securing 50-75% pre-leasing in tertiary markets is critical for obtaining funding.
Developer Insights
Challenges and opportunities for healthcare developers were a key focus here:
- Market Challenges: Rising construction costs, higher costs of capital, and reduced availability of funds make development more difficult.
- Senior Living Demand: The need for senior assisted living is growing, but lengthy entitlement processes and high costs pose challenges. Outpatient facilities in the 40,000–60,000 sq. ft. range remain a safer bet.
Reimagining Healthcare Real Estate
This session emphasized the evolving landscape of healthcare development:
- Outpatient Revenue Growth: Outpatient services now account for more than 51% of hospital revenue, underscoring the importance of outpatient-focused facilities.
- Phased Developments: Multi-phase projects, starting with outpatient facilities and potentially expanding to senior living or workforce housing, are becoming a strategic approach.
Reflections
Attending HEALTHCARE 2024 was both informative and thought-provoking. The event highlighted the healthcare sector’s resilience and provided actionable insights for navigating today’s challenges. From the steady demand for outpatient facilities to the evolving financial landscape, it’s clear that healthcare development remains a critical and rewarding field. For JCW Development, these takeaways reinforce our commitment to delivering impactful projects that address the needs of healthcare providers and the communities they serve.
