**Collin Hart of ERE Healthcare Shares Market Insight Ahead of Connect Healthcare Real Estate 2025**
Collin Hart, CEO and Managing Partner of ERE Healthcare Real Estate Advisors, will join a leading lineup at the upcoming Connect Healthcare Real Estate 2025 conference, taking place October 14–15 at the Hyatt Regency Irvine. During the event, Hart will team up with Revista’s Stephen Lindsey for an in-depth discussion on evolving trends in the healthcare real estate market. Ahead of the event, Hart offers his perspective based on ERE’s expertise in working with physician groups on sale-and-leaseback transactions and strategic real estate advisory.
**Q: ERE is known for advising physician groups on structuring sale-and-leaseback deals. How attractive are these deals today? What conditions make them compelling, and what challenges exist?**
**A:** Sale-and-leaseback deals remain a core solution for physicians seeking liquidity within a changing partnership structure. These transactions don’t imply a practice or ASC is shutting down; rather, they reflect transitions in leadership, control, or ownership dynamics that make third-party real estate ownership more logical.
Despite tightened capital markets and higher interest rates in recent years, demand for these transactions remains. A key driver is the increasing consolidation across healthcare operators. Often, when physicians no longer retain full control over operations, their facility becomes a misaligned investment, prompting discussions of a sale.
While high valuations are ideal, we advise our clients to focus on controllable elements – such as lease terms, operational strength, and partnership dynamics – rather than purely attempting to time the market.
In terms of lease expectations, investors typically prefer long-term, triple-net (NNN) leases (10+ years) with annual escalators of 2–3%. They also look for tenant stability, with minimal reliance on a small group of providers and strong unit-level financial performance.
As for barriers, these transactions often involve nuanced deals with dynamic personalities. Unlike institutional tenants, physician practices require a more creative and open-minded approach during negotiations.
**Q: Which healthcare real estate sectors are currently drawing the most investor interest, and why? How could that change over the next 12 to 18 months?**
**A:** Surgical specialties, especially properties with ambulatory surgery centers (ASCs), are seeing the most demand. This trend reflects the broader shift toward outpatient care, which offers better clinical outcomes and greater cost-efficiency. Investors are following this movement, as ASCs tend to anchor tenants due to their higher buildout costs and their centrality to practice profitability.
Investor demand for this profile remains strong and could even increase as debt costs potentially decline over the next 12–18 months.
**Q: What role is adaptive reuse playing in healthcare real estate? How are investor expectations shifting with these types of projects?**
**A:** Adaptive reuse—converting commercial properties into healthcare facilities—is compelling in theory, but the economics must align. Acquisition prices must be low, especially on a per-square-foot basis, to offset the high costs of tenant improvements needed for healthcare uses.
Typical office space often requires a full gut renovation for medical use, with clinical buildouts ranging from $175 to $250 per square foot. For ASCs, those costs can be double or more. Infrastructure like power, water, structural load capacity, and life safety systems must also be evaluated before proceeding, as deficiencies in any of these areas can render a reuse project more expensive than a ground-up development.
Successful conversions require comprehensive due diligence early in the process to avoid costly missteps down the line.
**Q: What broader trends and risks are shaping healthcare real estate, and what signals are you watching for the future?**
**A:** Multiple macro trends are driving the market. Reimbursement pressures are pushing care to outpatient environments like ASCs, while telehealth’s rise is leading to shifts in space requirements and facility design. Regulatory developments increasingly favor large, well-capitalized systems over independent practices, further reinforcing consolidation trends.
Despite these changes, the overall investment thesis in healthcare real estate remains sound. Demand for care – and the space to deliver it – continues to grow. The key is to identify investments aligned with evolving delivery models and operational fundamentals.
At ERE, these dynamics fuel our commitment to helping physicians and their institutional partners optimize their real estate strategies.
**Looking Ahead: Connect Healthcare Real Estate 2025**
Trends in capital markets, development, leasing, and shifting demographics will all be front and center at Connect Healthcare Real Estate 2025. The event will spotlight investment and operational strategies for medical offices, freestanding emergency departments (FSEDs), urgent care centers, hospitals, and more. This year’s conference offers a valuable platform to engage with thought leaders shaping the future of healthcare real estate.
Join the conversation in Irvine this October.
