A Growing Sector, Due to an Aging U.S. Population

The healthcare sector, made up of properties such as medical office buildings, senior living facilities, hospitals, etc., is growing, despite economic headwinds, with demand predicted to continue in the coming years. The aging U.S. population, with higher rates of chronic health conditions, is increasing the need for medical services and senior housing facilities. The United States Census Bureau has reported that by the end of 2023 those aged 75+ will increase to 24.4 million, and Americans 85 years or older will hit 6.9 million.1

By 2030, all baby boomers will be older than age 65 – meaning that one in five Americans will be of retirement age. By 2060, that number increases to nearly one in four Americans will be 65 years old or older.2

Medical Office Buildings

Increasing Transaction Volumes

Transaction volumes reached an all-time high in 2022 with approximately $26 billion of capital invested into the sector. Medical office buildings (MOBs) made up the largest portion of healthcare real estate transactions at 58%; followed closely by ambulatory surgical centers (ASCs) at 26.8%.3

This highlights that no matter the economic climate, people will always need to see a doctor or schedule an operation.

The Fundamentals – Occupancy, Rents, & Construction

MOB fundamentals continue to be healthy amid inflationary pressures and rising interest rates, making it an attractive recession-resilient asset class compared to other core real estate sectors. With the high cost of building a ground-up medical office space, most medical office tenants tend to remain in the same space for a longer period of time, providing stable occupancy and the opportunity to increase rents regularly.

Strong Occupancy Rates Throughout 2022

Occupancy rates since 2018 have remained steady at 91- 92% year-over-year. Strong occupancy is mainly driven by the in-person nature of many medical services, an aging population, and the growing demand for outpatient treatment facilities.4

Continued Rent Increases Throughout 2022

Driven by strong occupancy growth, rental rates for MOBs have averaged $22.68 per square foot since 2017 with growth increasing by 2% on average year-over-year.4

An Increase in New
Construction Starts

Despite a slow down across the construction industry primarily due to the COVID-19 pandemic, MOBs saw an increase in new construction starts in 2022 of nearly 3 million square feet over 2021, reaching a total of more than 26.7 million square feet.4


Shift Toward Outpatient vs. Inpatient Care

Healthcare organizations may need to offer more services onsite or remotely, which could require multiple locations instead of relying on one large hospital or health system alone. The trend toward outpatient care was accelerated by the COVID-19 pandemic and the importance of well-equipped and well-located healthcare facilities was underscored.

Outpatient care helps reduce the strain on hospitals, allowing them to focus on treating patients that do not require hospitalization but must have a medical procedure. Additionally, outpatient facilities generally allow patients to access medical care at lower costs with better experiences than a traditional in-patient setting.

Senior Housing

Well-Positioned for Future

Demand for senior housing facilities is expected to increase significantly in the coming years due to the long-term tailwinds from the aging baby boomer generation increasing, occupancy rates, and a shortage of new construction projects.


The Fundamentals – Occupancy, Rents, & Migration

Increasing Occupancy Rates

Total senior housing occupancy rates are increasing. At the end of 2022 total occupancy increased nearly 1% to 83%, the highest level of occupied units in history.5

Annual Rental Rate Growth

During the second half of 2022 all four senior housing property types (independent living, assisted living, memory care, and continuing care retirement communities) saw annual rental rate growth above 4%. The highest it’s been in more than a decade.6

Benefitting from
Robust Migration

Interestingly, of all construction projects slated for 2023, 45% of all senior housing units are based in regions benefiting from robust migration, including the Southeast, Mid-Atlantic, and Southwest.6

Inland’s Healthcare Resource Center

Healthy Demographic-Driven Demand for Healthcare Properties

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1 Integra Realty Resources. 2023-2028 Seniors Growth and Demand Report. Accessed March 2023

2 United States Census Bureau. The Graying of America: More Older Adults Than Kids by 2035. March 2018

3 JLL. Healthcare Investor survey and Trends Outlook. United States. 2023

4 Revistamed. Custom Report. March 2023

5 Senior Housing News. Senior Living Occupancy Reaches over 83% in Q4 as Industry Sees Most-Ever Occupied Units. January 2023

6 Marcus & Millichap. Senior Housing National Report. 1H/23. Accessed April 2023