Dive Brief:
-
Construction of medical office buildings in the U.S. has decreased by half since 2009, according to Colliers International’s Medical Office Highlights 2015 Outlook.
-
“Certificate of Need” programs in many states have restricted construction of healthcare facilities since the 1970s, even though the federal CON program was repealed in the late 1980s. The intent of those programs was to thwart healthcare inflation and the potential for an oversupply of hospitals.
-
Uncertainty about what impact the Affordable Care Act could have on healthcare has also limited construction of medical buildings, the report said. And the rising use of retail clinics and urgent care centers has lowered the demand for traditional medical office space for some procedures.
Dive Insight:
Over the next few years, construction of medical offices is likely to increase for four reasons: First, as the impact of the ACA becomes more clear, investors will be more confident about the future demand for the space. Second, the demand for open, flexible spaces could spur the construction of new buildings and the redesign of existing offices. Next, technology changes in the field will prompt the building of more modern buildings, as retrofitting existing offices could prove too costly. And finally, the downturn in construction over so many years has left existing structures with very low vacancy rates and spurred more demand for healthcare real estate.