Medical Properties 2020: Q&A with Beth H. Young, Colliers International
Beth Young
HOUSTON – (Realty News Report) – Healthcare is ingrained in Houston’s real estate landscape alongside energy. The Texas Medical Center spans 1,345 acres, contributes roughly $25 billion in GDP, and ranks as the eighth-largest business district in the United States. Its campus includes approximately 50 million developed square feet and about 9,200 patient beds. What does this mean for the city’s medical real estate market? Are investors still drawn to Houston’s medical office properties? Are sales rising, falling, or holding steady? To answer these questions, Realty News Report spoke with Beth Young, Senior Vice President at Colliers International. Beth advises on healthcare properties and investment sales for health systems, private and institutional investors, and users of medical facilities. She serves as a trustee of the Harris County Hospital District Foundation, where she chairs the Small Grants Committee, and she is a board member of the Greater Houston Women’s Chamber of Commerce, chairing the Women’s Health Network of the Texas Medical Center. A recognized expert in healthcare real estate, she is a top producer for Colliers International.
Realty News Report: Investors showed strong interest in Texas healthcare real estate in 2019. What do you expect for this sector in 2020?
Beth H. Young: The Houston healthcare office market is set for continued growth and strong investor interest. Demand for healthcare investment properties is high, but inventory remains limited. At the same time, robust demand for suburban medical offices is spurring developer activity. When attractive assets come to market, expect significant competition among investors.
Realty News Report: Who’s buying these properties? Are foreign investors or REITs active?
Beth H. Young: Private equity remains the dominant buyer in healthcare property transactions, followed by health systems and REITs depending on asset quality and location. Hospitals and health systems still own most medical office buildings (MOBs), with private investors and providers next, and REITs participating where the opportunity fits their portfolios.
Realty News Report: The office market has seen a flight-to-quality. Is the same pattern happening in the medical sector? What makes a top-tier medical property today?
Beth H. Young: Investors consistently pursue the best quality they can acquire because it delivers long-term returns. Top attributes for MOBs include prime location, strong occupancy, creditworthy tenants, long-term leases with built-in rent growth, and a newer or well-renovated building. Buyers also want the “story”: visibility, area growth, why tenants will be attracted to this location over the long term, and the building’s renovation history. Tenants in higher-quality MOBs are often more creditworthy and commit significant capital to build out medical suites and install costly equipment, making them less likely to relocate. Historically, healthcare properties maintained occupancy above 90% during downturns, outperforming many other property types.
Realty News Report: The Baby Boomer generation is aging—what risks and opportunities do demographic trends present?
Beth H. Young: Aging demographics strongly support the long-term viability of healthcare properties. Baby Boomers currently account for about 28% of the U.S. population; within a decade one in five Americans will be over 65. That implies a roughly 50% rise in the number of people needing nursing home care. In 15 years those 65 and older will outnumber those under 18, and in 30 years the senior population will double. An aging population increases prevalence of chronic conditions such as diabetes, cancer, heart disease, and Alzheimer’s, driving demand for medications, healthcare professionals, and more space for medical services. City planners and health systems must adapt how care is delivered and how communities are structured to meet these needs. Many governments and healthcare providers have been planning for these shifts for decades.
Realty News Report: Are all types of medical properties poised for growth, or are some segments better positioned?
Beth H. Young: Several healthcare property types are showing strong growth: hospitals, medical office buildings, surgery centers, imaging centers, urgent care facilities, free-standing emergency centers, rehabilitation centers, behavioral health facilities, and assisted living. Over the last five years, the national footprint of MOBs grew by about 4.5%, while urgent care centers—often located in retail-like settings—increased roughly 44%. New hospitals frequently lead to repurposing of older facilities into rehab centers, behavioral health facilities, or assisted living. A prevailing trend is the development of outpatient services closer to where patients live, offering faster and more cost-effective care. Of the recent medical office construction, roughly 70% has been off-campus in locations with retail characteristics. Telehealth and remote care technologies also allow many older adults to live independently longer, further boosting demand for outpatient facilities rather than institutional long-term care.
Realty News Report: Houston has seen substantial construction recently, with new MOB deliveries trailing only a few major markets. Is overbuilding a concern?
Beth H. Young: The Houston metro added nearly 92,000 residents in 2018, bringing the region close to 7 million people and projected to surpass 7.1 million by 2020. The area ranked among the top U.S. markets for population growth. Given continued population expansion and an aging demographic, demand for healthcare services—and the facilities that provide them—is expected to remain strong. Ongoing trends toward longer lifespans and increased healthcare utilization suggest that new medical office space will remain necessary to meet demand rather than result in widespread overbuilding.
