Outpatient care is booming and poised to accelerate, despite economic and political uncertainty

Employment growing faster in healthcare than any other U.S. sector, but new facilities construction not keeping pace

July 10, 2019

CHICAGO, July 10, 2019 – Outpatient care, and medical office real estate, is primed for accelerated growth across nearly all U.S. markets, regardless of potential political and economic headwinds, according to JLL’s Healthcare Real Estate Outlook: Prognosis for growth.

The healthcare industry is the undeniable force in the U.S. economy – it is the largest U.S. employer as of 2018, employing more than 13% of the workforce. It is also one of the fastest-growing industries in the U.S. economy. But even as the healthcare real estate has grown to more than $1.2 trillion in value and is more diversified than ever, new construction is not keeping pace. For many hospitals and health systems, reconfiguring their footprints to include more outpatient medical offices is the key to meeting new demand, delivering care to more patients safely, efficiently and conveniently.

“As policymakers continue to debate U.S. healthcare legislation, we see many shrewd healthcare providers remaining focused on long-term strategies addressing the growing healthcare economy,” said Jay Johnson, National Director, Healthcare, JLL. “In the long run, the growing and aging U.S. population and technological advances are the predictable trends that will support demand for outpatient care and the medical office sector, regardless of any regulatory changes that may be enacted.”

Technology is pushing more healthcare services outside hospital walls

Patients, providers and payers continue to drive healthcare delivery’s evolution toward a more decentralized model and away from inpatient care.

“Healthcare consumers increasingly expect greater availability and a better experience when seeking care,” said Johnson. “In response, healthcare organizations have developed locations that are easier for patients to access, which also allows providers to keep populations healthier and control costs by moving care off the traditional hospital campus.”

Another factor driving outpatient care is that many surgeries and diagnostic procedures that once required a costly inpatient stay can now be performed safely in an outpatient setting. Today’s minimally invasive surgical procedures, such as laparoscopy and robotic surgery, along with new anesthesia techniques, are reducing complications and enabling patients to return home sooner. Payers are also driving the shift, as they remove procedures from the inpatient-only list.

Medical offices will continue to be “darling” of health systems and investors

In this environment, it is easy to see why outpatient visitation increased by 25% over the past decade – and shows no signs of slowing down. While healthcare-related real estate has grown in general, medical office buildings have emerged as the most popular property type within the niche. With fundamentals that are more cycle-resistant than other, more traditional property sectors, this class of buildings has seen investors doubling down, drawn to its stability and bright prospects for continuing strong performance.

All major healthcare constituents stand to benefit from the growth of medical office real estate, particularly as property investment is no longer dominated by specialty healthcare real estate investment trusts (REITs). In 2014, REITs drove 60% of medical real estate transactions, while hospitals and health systems drove only 16%. Today’s buyer pool is more diversified, with new investors attracted by the sector’s stable growth.

“As healthcare spending is expected to grow by more than nearly $2 trillion in the next decade and reach a projected 19.7% of GDP in 2026, it is even more critical to find and deliver safe, effective care as efficiently as possible,” said Johnson. “Real estate has an incredibly important role to play in reimagining a more efficient, convenient, accessible health system.”

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of over 91,000 as of March 31, 2019. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.