Healthcare Real Estate Execs Predict Optimistic 2025 Despite Challenges Article originally posted on Globe St. on December 4, 2024 As the healthcare real estate industry gears up for 2025, industry leaders are expressing cautious optimism amid lingering challenges. At a recent industry event, executives from prominent companies have shared their insights on market trends, deal activity, and the evolving landscape of medical real estate. Market Outlook: Cautious Optimism The consensus among industry leaders is one of guarded positivity for the coming year. Allan Brown, partner at Prevarian Companies, encapsulated this sentiment, stating, “I am probably irrationally optimistic about 2025. It feels like we are talking to our investors and operators and they are all reasonably optimistic and some dust has settled to an extent.” This optimism is tempered by ongoing challenges, particularly in the realm of deal-making. Brown acknowledged, “It is still difficult to get deals done but there is general optimism out there.” Deal Activity and Market Dynamics Billy May, EVP of asset management at Montecito Medical, reported an uptick in market activity, noting, “The last quarter or so, we have seen a lot more deal activity. Sellers were willing to part with their assets. New equity came in to compete in our space.” May’s company is poised for significant growth, projecting around $450 million in acquisitions for the year. Challenges and Opportunities Benjamin Ochs, CEO and managing partner of Anchor Health Properties, highlighted the ongoing impact of interest rates on the capital stack. “What is both a challenge and an opportunity is long-term leases and fixed rents and the cost of debt moves up and down,” Ochs explained. He also pointed out the persistent issue of high construction costs, while noting a gradual acceptance of the new economic reality. Sharon Harper, President/CEO of Plaza Companies, emphasized the importance of diversification, stating, “We have grown our portfolio through partnerships with universities and such as it has led to growth. Also, the medical education segment of the industry is growing rapidly… it really is the talent pipeline for our businesses and buildings.” Adapting to Market Realities The industry is actively seeking creative solutions to navigate the current market conditions. Brown described a shift in financing strategies: “We have had to restructure how we finance things. The yield has a lot of pressure. We can’t just keep raising rents on our hospital tenants.” May highlighted the importance of understanding tenant needs, saying, “If you get in front of them and understand their needs, you can get in front of it before anything happens.”