Report: Demand for Medical Office Space Continues Despite Advent of Virtual Visits

JLL

By Catherine Sweeney 

While virtual care has been on the rise in the aftermath of the COVID-19 pandemic, recent research shows that medical office assets are still performing well. According to a JLL Healthcare New Patient Consumer Survey, a majority of virtual appointments still result in in-person office visits. 

“Physical facilities are still at the center of the healthcare ecosystem,” said Jay Johnson, U.S. practice leader of JLL Healthcare. “Virtual care via telehealth is replacing some in-person visits, but nearly three quarters of the care still involves a physical location, according to our survey results. Telehealth is actually leading to subsequent in-person care interactions that might not have occurred otherwise. Steady occupancy of 91 to 92 percent in the national medical office market over the past three years, coupled with slightly increasing rental rates, seem to bear out the durability of physical sites of care.”

The report, which surveyed patients across the United States throughout January of 2022, showed that about 62 percent of medical visits were exclusively in person without a virtual care component. However, about 31 percent of respondents who had virtual care appointments said it resulted in an in-person visit. Overall, virtual visits have stabilized to about 11 percent of patients, after having peaked at 52 percent of total visits in the second quarter of 2020. 

While both virtual and in-person visits appear to be utilized, the survey found that several factors had an impact on which type of visit a patient might gravitate towards. For instance, many patients noted the importance of having convenient access to a medical office building. About 83 percent of patients said they would prefer to travel less than 30 minutes to a doctor’s appointment and 40 percent said they would prefer to travel less than 15 minutes.

According to Johnson, a majority of respondents said having a convenient location was also more important than the quality of the facility itself. 

“That’s kind of important to us on our side of things, because we, as real estate providers,  are concerned with helping our clients find the right site to be and of course, that relates to convenience. We’re also concerned with helping them manage the site, or build the site as well,” Johnson said. “That finding indicates that location is the primary thing that we need to be the most concerned with.” 

In general, preferences in care differed based on the type of community a particular patient was located in. Those living in urban areas were found to prefer telehealth appointments for an initial consultation. Further, only about 36 percent of those living in urban areas would prefer to travel less than 15 minutes to a healthcare appointment, as opposed to 45 percent of those living in suburban markets. 

While locational convenience was deemed one of the most important factors to respondents, these numbers varied slightly when looking at the types of facilities. For instance, about 24 percent of people said they would drive further distances for a surgery center. At the same time, about 40 percent of people said it was more important for minute clinics and urgent care facilities to be conveniently located than other types of facilities.. 

While convenient access will help open doors for more patients to access in-person care, telehealth appointments will likely continue to be an option for patients. According to JLL, 76 percent of surveyed patients who have had a telehealth appointment in the last six months of 2021 would like to have one in the future. Looking ahead, JLL suggests care providers will likely continue to use telehealth options in tandem with in-person visits as opposed to a replacement service.

In general, healthcare will likely continue to be in high demand due to the increasingly elderly population in the United States as well as the increased demand caused by the COVID-19 pandemic. In fact, recent research from JLL shows that 93 percent of the national medical office supply is currently occupied, with rates only expected to increase over the next several years.  

“In tandem with that increasing occupancy trend has been an increasing rental rate trend as well. Rental rates will continue to gradually go up,” Johnson said. “…Consequently, on the real estate side of things, you can see that the real estate investor interest in health care property has continued to go higher and higher. Cap rates are really near record lows right now because there are so many investors that are interested in healthcare real estate, and some of that is being fueled by the fact that healthcare real estate is a good stable asset class with a positive future outlook.”

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