Why are Investors Planning on Putting More Money into Healthcare?

As United States Treasury Secretary Janet Yellen recently conceded, the inflation that’s currently hitting today’s market isn’t transitory. What’s more, both JP Morgan Chase and Goldman Sachs are warning of tough economic times ahead as both inflation and supply chain shortages rattle the global economy. Even the residential housing market, once a red-hot seller’s market, is cooling as real estate experts warn people who are considering selling a home to do so now but not expect to receive the same profit a neighbor may have gotten for his or her home just a month or two ago.

While the current state of economic affairs is challenging to navigate, there is one investment option that many believe to be foolproof. A recent survey of five hundred influential REITs, private capital investors, institutional healthcare investors, and developers found that a whopping 85% of them believed the healthcare real estate market is "recession-proof", a safe place to invest money even as traditional investments falter amidst uncertain market conditions.

Recent trends and statistics show that these investors are right to believe that the healthcare real estate industry will be hot for the foreseeable future. In the next twenty years, the population of elderly individuals over the age of 65 will grow by 44%. The need for care homes, senior housing, and assisted living facilities will grow with the aging population, making this field an ideal investment opportunity for those interested in long-term profits. There is also a growing need for more new hospitals and clinics. The Health Resources and Services Administration has identified nearly 3,500 "Medically Underserved Areas." However, investors in this field should be aware that an acute healthcare provider shortage is inhibiting growth in this sector as it's often difficult or even impossible for many healthcare providers to expand to new areas even if they have access to the right land simply there aren't enough trained doctors, nurses, and other professionals to staff the new facility.

Another niche healthcare real estate market that is expected to grow for the foreseeable future is life science space. Investment sales have risen by 300% since May 2020 as a fast-growing pharmaceutical industry seeks out locations that can be used as lab space. Even a surge in lab space construction won't lower prices anytime soon as the trade, which was valued at $1.2 trillion in 2018 but is expected to be worth $1.5 trillion by the end of 2023, is growing too fast for construction companies and developers to keep up with.

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There is no doubt that healthcare real estate is in high demand, and will remain so for the next few years. Statistics show that nearly 85% of REITs, developers, and investors are looking to buy more healthcare real estate this year while only 26% of these individuals are interested in selling their real estate holdings. Limited demand is almost certain to keep prices rising even as other real estate market niches fall due to rising interest rates and other market-related challenges. Even so, caution is advised as some healthcare real estate options are likely to be more profitable than others. Those interested in the market should choose locations and properties with care to ensure the highest possible profit with the fewest problems and expenses.