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Powerful Trends Drive Demand for Medical Office Space

Two major trends with long time horizons are driving demand for medical office space.  The first trend is the graying of America, as baby boomers turn 65 at the rate of about 8,000 per day for the next 18 years, according to AARP.  America’s senior population is mushrooming, and increased demand for health care providers is an obvious consequence. The second trend that promises to have long-term real estate implications is the impact of the Affordable Care Act, through which an estimated 30  million of previously uninsured people will gain access to health care and spur demand for additional medical practitioners and facilities.

Florida is a prime example. From 2012 through 2013, Florida’s population grew by almost 250,000 people.  Many of the newcomers are retirees who are relocating from other parts of the country now that the residential real estate market has recovered and they can sell their homes, and the stock market has regained its momentum. The state already has the largest percentage of residents 65 years or older in the nation and economists predict that one out of every four Floridians will be 65 or older by 2030.

At the same time, there also is a resurgence of younger workers in the state, which had slowed during the recession when construction-related jobs disappeared. Real estate industry experts expect medical office occupancies to grow along with the growing need for medical services in all age categories. According to federal health officials, nearly one million Floridians signed up for a health plan through the Affordable Care Act’s insurance exchanges during the six-month enrollment period that ended March 31. Florida’s enrollment numbers were the highest of all 36 states that used the federally-run insurance exchange.

The relative stability of medical offices adds to their appeal for buyers. People need health care during good and bad economic times, making medical office space less sensitive to market declines, compared to other sectors. Especially now that ACA and Medicare will effectively be paying  the rent. Regarding location of these facilities, opportunities exist in close proximity to hospitals as well as in suburban settings where care can be delivered in an outpatient facility close to where people live.

Fueled by an aging population and an explosion of people who now have health insurance, it seems logical to conclude that robust demand for medical and health care-related office space will continue into the foreseeable future.

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