Commentary by Todd Perman, CCIM, Vice Chairman, Global Healthcare Services

Healthcare staffing issues have become common in the wake of the pandemic. Hospitals continue to see staffing shortages: both short-term shortages due to COVID-19 exposure, the ensuing isolation, and long-term shortages created by resignations due to burn-out and workers opting for alternative workplaces with more attractive salaries and schedules.

In January, one hospital made an extraordinary move to attempt to stop a group of its employees from leaving their jobs for another nearby hospital. The unprecedented tactic: a restraining order.

Wisconsin health system ThedaCare argued the restraining order was necessary to g...

Commentary by Todd Perman, CCIM, Vice Chairman, Global Healthcare Services

Primary care, one of the least-lucrative practice areas in medicine, dominated investments in 2021, with U.S. companies investing $16 billion into the space. Private equity, strategic acquisitions and new primary care companies made up the dominant investors.

While primary care revenue plunged 7% in 2020, investors were increasingly attracted to primary care’s potential to care for patients at a low cost. Hospitals, which often seek to add primary care services for future profitable referrals to specialists, will now compete with private and alternative investors who share this same goal.

The effects can be seen by...

Commentary by Eric Murphy, Managing Director, Global Healthcare Services

Healthcare merger and acquisition activity had a consistent theme throughout 2021: fewer transactions, yet total transaction revenue and average size of the seller by revenue reached all-time highs.

In its Healthcare Merger & Acquisition Activity Report: 2021 M&A in Review, Kaufman Hall reported that 2021 finished with 49 announced transactions, compared with 79 in 2020. The average annual revenue of the smaller partner in 2021 was $619 million, up from $388 million in 2020. 69% of the 2021 transactions consisted of not-for-profit providers acquiring another not-for-profit provider.

The decrease in the number of transactio...

Commentary by Eric Murphy, Managing Director, Global Healthcare Services

Medical Office Building (MOB) transactions finished the year strong with $4.8 billion in transaction volume during the fourth quarter of 2021. This represented a 14% increase in transaction volume compared to the fourth quarter of 2020. The $4.8 billion in transaction volume is the third-largest quarterly amount over the past five years. More investors are entering the MOB asset class and as a result, cap rates compressed to 5.9% for the quarter. The tightening of the market drove the average price per square foot to $389, its highest level over the past five years.

According to Revista, 2021 finished with record-breaking...

Commentary by: Eric Murphy, Managing Director, Global Healthcare Services

For the past three quarters, healthcare mergers and acquisitions activity has followed a similar theme: fewer transactions while the total transaction revenue and average size of seller by revenue remain at an all-time high level. Kaufman Hall reported in its Q3 2021 Healthcare Merger & Acquisition Activity Report that the average seller size for the first three quarters of 2021 was $659 million, which is nearly double 2020’s average of $393 million. The number of transactions through third-quarter 2021 (34) are almost half of what was announced through the first three quarters of 2020 (62).

The three major transac...

Commentary by: Eric Murphy, Managing Director, Global Healthcare Services

Medical Office Building (MOB) sales saw a flurry of transactions during the third quarter of 2021, with a 103% increase in transaction volume compared to the third quarter of 2020. Year-to-date transaction volume through the third quarter has also increased by 13% compared to the first three quarters of 2020. With more investors entering the MOB space, third-quarter cap rates compressed to 6.2%. The tightening market drove the average price per square foot ($/SF) to $377—the highest it has been in the past five years.

The third quarter of 2021 saw the third-highest quarterly volume over the past five years, as 437 ...

Commentary by: Todd Perman, CCIM, Vice Chairman, Global Healthcare Services

Hospitals and health systems are steadily implementing cost reduction efforts to mitigate the growing costs associated with providing care in today’s healthcare environment. While healthcare spending has continued to grow in recent years, the COVID-19 pandemic intensified the need for providers to reduce costs, as clinical and operational departments were challenged. The American Hospital Association’s October 2021 Cost of Caring report highlights the current trends driving up healthcare services and accordingly, costs. These include: increased use of care as more people have insurance, an aging population...

Commentary by: Todd Perman, CCIM, Vice Chairman, Global Healthcare Services

Software company Kareo recently surveyed over 1,300 independent medical practices to gauge its outlook on the challenges and successes in the post-pandemic environment. The findings were interesting. The attitude of the surveyed practices is positive, with 75% of those surveyed reporting growth ahead; notably, only 59% predicted they’d grow in 2019. Additionally, over 50% of independent practices saw similar or even higher patient volumes in 2020 compared to 2019.

Many practices attribute this positive stance to the technology adopted across the industry. As discussed in our Spring 2021 newsletter, telehealth tec...

Commentary by: Chris Gordon, Senior Managing Director, Global Healthcare Services

In light of the pandemic, hospitals and health systems have had to reevaluate the standards and design of their healthcare facilities. While certain criteria such as welcoming, easy-to-navigate spaces will be mainstays of healthcare facilities, health systems must quickly identify design solutions to avoid some of the major challenges faced in the height of the pandemic.

One trend offering this solution is creating multipurpose spaces that can easily transition based on emergency situations—having the flexible infrastructure to run medical gas, for example, to different areas or to create negative pressure ...

Commentary by: Mohsin Azmi, Associate Director, Global Healthcare Services

Medical office building (MOB) transactions in the second quarter of 2021 were up 19% year-over-year. The market saw an increased focus on the property type, and as more opportunities were marketed, cap rates increased slightly from the first quarter of this year. The average cap rate was 6.5%, ten basis points lower than the second quarter of 2020 and very similar to the average cap rate in the second quarter of 2019. The tightening of the market drove the average price per square foot ($/PSF) to $331, which is the highest Q2 $/PSF in the past five years.

Three hundred and three MOB transactions closed in the quarter. T...