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FAVORABLE MACROECONOMIC TRENDS: HEALTHCARE IS GROWING

The healthcare industry is expected to be one of the fastest growing parts of the U.S. economy over the next decade reaching almost 20% of U.S. GDP by 2023. This is driven by the aging of the baby boomer generation and the long-term rollout of the Affordable Care Act. This increased demand for care is expected to make healthcare the fastest growing sector for employment over the next decade. All of these factors are resulting in a change in the way that healthcare will be delivered – primarily through the movement of care to outpatient settings that are more cost-effective.

Affordable Care Act Expands Access

ADDITIONAL INSURED

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Source: American Hospital Association

  • An additional 25 to 35 million individuals will gain health insurance by 2020
  • Increasing focus on cost-efficient, preventative medicine
  • More insurance coverage, more patients, more health service tilization

Aging Population

65+ POPULATION AS A PERCENT OF TOTAL

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Sources: U.S. Census Bureau, Rosen Consulting Group

  • Baby boomers are aging, causing the elderly population to become 17%of the population by 2020
  • Utilization of healthcare services increases with age, increasing demand for healthcare services over time
  • The Census projects that the average life span will surpass 80 years by 2020

Outpatient Visits Are Increasing Over Time

INPATIENT ADMISSIONS AND OUTPATIENT VISITS

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Source: American Hospital Association

  • Hospitals have been facing limitations on expansion and as a result, more
    procedures are being performed in outpatient facilities
  • Insurance companies and government healthcare programs have been directing
    patients to less costly outpatient care
  • Consumer preferences for specialists and preventative care have boosted healthcare employment in these specialties, accelerating demand for MOBs as patients move to the lower cost, outpatient settings

Healthcare Employment Is Strong

PROJECTED U.S. EMPLOYMENT GROWTH (2012-2022 EST)

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Sources: Bureau of Labor Statistics, Rosen Consulting Group

  • Increased healthcare utilization is driving healthcare employment
  • Healthcare sector employment is projected to grow 70% faster than the broader U.S. economy through 2022
  • Increasing demand for non-physician practitioners, including nurses, physician assistants, and other healthcare professionals
  • From 1994 to 2010 the average number of office visits per person increased
    from 2.6x to 3.3x per year

Compelling Emerging Trends

According to the Urban Land Institute, medical care, as an industry, and the real estate associated with the delivery of healthcare services, will continue to grow for two basic reason:

  1. it is an essential human service
  2. it is heavily supported by the government.

The projected mushrooming increase in demand for medical/healthcare services, and the associated real estate, is supported by a variety of long term trends and drivers :

  • An aging population drives increases in demand for medical services. Those over 65 have three times as many medical office visits per year as those under 45. The oldest of the 78 million post war baby boomers turned 65 in 2012 and the youngest will reach 65 in 2029.
  • By 2019, as a result of increased access to healthcare coverage and population growth, 32 million more Americans will be covered by health insurance plans. New health care laws and trends do little to increase the supply of additional facilities but increased demand for services will set the stage for healthcare related property appreciation and an opportunity for the growing demand to be met by the private sector.
  • Prime has continued to monitor the net leased property sector. The Real Estate Investor forecasts demand for healthcare related real estate to expand 19 % by 2019. Over 64 million square feet is required to meet the expanded demand with roughly only 7 million square feet of new construction product in recent years.
  • Both demand and supply point to increased spending on healthcare services and appreciation in value of healthcare related real estate.
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