March 8, 2023

The real estate investing environment these days is mixed. Many people expect a recession in 2023, although we’ve been hearing that for quite a while.

Future expectations do affect decisions now, so much of the real estate industry has been slowing. Global commercial real estate investment volume fell substantially, year-over-year, in Q4 2022.

This is not surprising, given macro conditions. While employment and GDP have been strong, inflation and rising interest rates are always an economic drag. Uncertainty about a possible recession means people are pulling back a little on investments.

But this overall slowdown in real estate investments does not apply everywhere. Valuations and opportunities vary across sectors and regions. The medical real estate sector, in which Alliance has built a speciality, remains quite strong.

Real estate investing is a highly localized business. Whatever the larger trends, every property investment depends on its own local interplay of supply and demand. Construction has slowed, so supply is restricted. Meanwhile, the US medical industry remains hot.

The healthcare industry currently accounts for almost 20% of the US economy now and is expected to triple in value by 2040.

As baby boomers continue to age, demand for healthcare will continue growing. Investment giant Blackrock estimates that the elderly percentage of the US population will continue growing indefinitely, although not as quickly as other parts of the developed world.

And 2022 was the biggest ever year for healthcare investment at approximately $26 billion. The majority of this capital went into real estate, and demand continues to outpace supply.

Whether inflation persists or not, whether a recession comes or not, people will still need medical care, and healthcare providers will still need physical spaces for their work. This sector is extremely resilient.

These days, retail properties aren’t moving as quickly, and buyers are wondering about when we’ll see the bottom of the market. But many medical offices are located within larger commercial centers and a slowdown can help specialized experts like Alliance find great deals.

Alliance’s deep understanding of localized supply and demand mean we are still finding great opportunities within the larger real estate slowdown. Our sector is hot and our analysis is top notch.

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