Medical office fundamentals to remain strong, despite macro challenges

The medical office sector is likely to see fundamentals remain strong in 2023, although the broader economic challenges may pose some threats to the healthcare industry, according to Kevin Yen, principal, investments, with BentallGreenOak.

“Major health systems are battling rising operating costs while revenue, primarily from private insurance-driven model, is growing at a much slower pace,” said Yen, in an interview with IREI. “This is unlikely to significantly change health systems’ credit ratings but could shift the way they view real estate operation and expansion. From an institutional investment perspective, investors will also be more focused on the specific uses in a medical office asset before making investment decisions.” Yen added these factors are likely to negatively impact medical office transaction volume in 2023.

“That said, the medical office fundamentals will remain strong given lack of new supply and growing demand for the services provid