Aaron Jodka
- Revista reported that medical properties continued to see occupancy gains in Q1, marking a steady increase since the end of 2020.
- Healthcare spending rarely falls, based on the Bureau of Economic Analysis’ personal consumption expenditures data.
- Given this backdrop, clients are viewing the medical sector as a port in the storm amid growing uncertainty in the marketplace.
- Questions about potential Medicaid cuts are top of mind for providers as they assess the possible impact on profitability.
- Overall, medical properties are further along in their recovery than other asset classes.
The stability of the medical sector continues to capture investors’ attention. According to data from Revista, fundamentals are improving across both the top 50 and top 100 markets—a trend observed in both on-campus and off-campus properties. Occupancies have been rising steadily since late 2020/early 2021, while rents are on the upswing. As a result, medical properties are well ahead of other asset classes in their recovery this cycle. By contrast, most major asset classes are expected to see stabilizing occupancies in 2025.
Healthcare spending remains one of the most consistent growth drivers in the U.S. economy. Outside of the pandemic, there has never been a year-over-year decline in personal consumption expenditures (PCE) on healthcare. In fact, there have only been four quarters on record in which spending failed to increase on a quarterly basis—one each in 1960, 1965, 2014, and 2018. This steady upward momentum is driven by advancing medical treatments, population growth, and an aging demographic.
Medicaid, the government program that provides health coverage for low-income individuals, could be facing budget cuts. Historically, Medicaid spending has never seen an annual decline. Given the program’s size, many healthcare providers rely on Medicaid reimbursements, which accounted for approximately 18.5% of the national payor mix as of 2022, per Definitive Healthcare. Whether cuts will materialize—and to what extent—remains uncertain.
Despite this, the broader fundamentals driving demand for the medical space remain strong. The U.S. population continues to age, increasing the need for healthcare services, while medical advances are expanding treatment options across a growing range of conditions. With limited supply-side pressure and rising rents and occupancies, the healthcare sector is well-positioned to attract continued capital flows.
Jeffrey Myers