**Industry Insight: Collin Hart of ERE Healthcare Real Estate Advisors Previews Key Market Trends Ahead of Connect Healthcare Real Estate 2025**
Collin Hart, CEO and Managing Partner of ERE Healthcare Real Estate Advisors, will be a featured speaker at the upcoming Connect Healthcare Real Estate 2025 conference, scheduled for October 14–15 at the Hyatt Regency Irvine. Ahead of the event, Hart shared his perspectives on market drivers, investor interest, and the future of healthcare real estate in a discussion with Revista’s Stephen Lindsey.
### Q: ERE is well known for advising physician groups on structuring sale-and-leaseback deals. In the current capital market climate, how attractive is a sale-leaseback for physicians or outpatient practices? What conditions make these deals compelling—and where do you see the biggest barriers today?
**Hart:** Sale-and-leaseback transactions are one of our firm’s specialties. They provide an exit strategy for physicians to create liquidity within their practice partnerships. This doesn’t mean the practice or ambulatory surgery center (ASC) is going away, but transitions in leadership or partnership dynamics often make it worthwhile to transfer ownership of real estate to a third party.
This strategy has seen consistent demand over the years, regardless of the broader market cycle. Even with rising interest rates, physician groups continue to consider these deals—especially as consolidation changes operational control. If doctors initially bought or built real estate to gain control of their practice, and later find that control diluted, the investment risk profile often changes and can prompt discussions around selling.
While everyone wants top dollar for their asset, our guidance is to focus on controllable factors—career timelines, group structures, and lease terms—rather than trying to time the market.
Typical investor preferences include long-term (10+ years), triple-net leases with 2–3% annual rent increases, and tenants with stable credit and operational performance. Investors favor diversified practices over those reliant on a few providers, and they appreciate strong, profitable operations.
Sale-and-leaseback deals require creativity and flexibility. Physician-backed real estate lacks formal credit ratings and is often deeply personalized, making negotiation and structure vital to a successful transaction.
### Q: From your viewpoint, which healthcare real estate subsectors are seeing the greatest investor interest lately? What’s fueling that appetite, and where might we see capital shift in the next 12 to 18 months?
**Hart:** Investor interest is strongest in surgical specialties, particularly in facilities that house ambulatory surgery centers. This trend aligns with the broader healthcare shift to outpatient care, which typically yields better outcomes at lower costs. With healthcare delivery moving in this direction, real estate investors are following.
Facilities with ASCs also offer “stickier” tenancy. These are costly to build and equip, which means practices are less likely to relocate—making them attractive investments. As interest rates stabilize or decline over the next year or so, we expect demand for these high-quality outpatient assets to remain strong or even increase.
### Q: Adaptive reuse is gaining traction as a strategy to offset high land and construction costs. How are investor and operator expectations aligning when converting non-medical buildings to healthcare space? What deal structures or underwriting changes are unique to these projects?
**Hart:** Converting office buildings to medical use is appealing, but the economics must make sense. Acquisition costs need to be low on a per-square-foot basis, especially as tenant improvement (TI) costs for medical clinics are high—ranging from $175 to $250 per square foot for clinical spaces. ASCs can run double that figure or more.
In many cases, existing office builds need to be gutted and completely rebuilt, so their initial acquisition price should reflect that of a shell property. Infrastructure capacity—electric, water, structural load, fire/life safety—must also be evaluated. If an adaptive reuse project requires significant infrastructure upgrades, it can become more expensive than building ground-up, negating any initial cost advantages.
Early-stage diligence is critical. Successful reuse projects depend on thorough vetting and realistic cost considerations.
### Q: What market signals are you watching that could reshape healthcare real estate? Conversely, what risks could impact investment or property values in the sector?
**Hart:** Several signals are actively reshaping the healthcare real estate landscape. Reimbursement pressure continues to push services to outpatient environments like ASCs. Telehealth proliferation is reducing the need for large clinical footprints. And regulatory reform tends to advantage larger, corporate-backed operators, which can navigate red tape more effectively than independent practices.
Despite these changes, the core investment thesis remains strong. Healthcare is a necessity, and demand for properties where care can be delivered will persist. There are always risks, but those who understand the trends—particularly the transition to outpatient care and specialized in-person facilities—are well-positioned.
We remain energized about working with physicians, hospitals, and corporate partners to help them optimize their real estate holdings within this evolving environment.
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**Connect Healthcare Real Estate 2025** offers a dynamic agenda tracking capital flows, development trends, leasing strategies, and demographic shifts reshaping the medical office, FSED, urgent care, and hospital sectors. Join key industry players in Irvine this October 14–15.
