The healthcare real estate development landscape in 2024 will be shaped by several key trends. Developers are poised to encounter significant challenges stemming from inflation, elevated interest rates, and high construction costs. Additionally, an aging population and strong immigration put pressure on the publicly funded healthcare system, forcing provincial governments to look for ways to reduce expenditures.  One of the ways is to push traditionally hospital-based patient visits into the community at a local medical building. 

Healthcare providers are actively pursuing strategies to adapt to a post-COVID workplace and modernization of clinic space while keeping rental costs low. Addressing patients' preferences for convenient, safe spaces and aligning care delivery methods with their lifestyles is also a priority. Moreover, healthcare providers are modifying facilities to ensure emergency preparedness and exploring alternative settings for healthcare service delivery.

The development process inherently involves various risks, prompting healthcare providers to establish robust plans from the outset to ensure project success. Navigating the challenging landscape of real estate development requires a team with the experience and knowledge to oversee the process from start to finish.

Greg Appelt serves as the President of Appelt Properties, a real estate enterprise located in Toronto, and Kelowna, BC. Under his guidance, Appelt Properties has emerged as a key player in healthcare real estate acquisition, development, and management, while also excelling in the field of mixed-use residential properties.

Transitioning from a medical background, Greg Appelt founded the company in 2010, inspired by his experience with developing a medical building for his practice. Appelt’s knowledge of both sides of the development equation provides a unique insight into the world of healthcare real estate.

“I expected to have a long career as an allergist, like I’d planned,” says Appelt. “It wasn’t until I needed to design my own facility that I decided to make the switch into healthcare real estate.”

As healthcare delivery transitions from hospital to community Appelt believes the demand for bespoke medical real estate facilities will continue to escalate.

“What we’re seeing now with the pandemic coming to a close is that while traditional offices have transitioned to a hybrid work-from-home - model, the need for in-person healthcare hasn’t decreased. If anything, it’s increased.” 

Inflation Challenges

High inflation presents an additional hurdle to meeting the demand for new facilities, leading to increased borrowing costs that can impede healthcare developers from securing financing for new projects. This can result in delays in constructing new healthcare facilities.  Further, increasing costs at the government level are causing provinces to look for ways to reduce costs of delivering healthcare for the population.  

Construction slowdowns impact the timely expansion of healthcare services, affecting patients' ability to receive necessary care, as well as the overall affordability of healthcare services. Inflation and high interest rates impact the value of existing healthcare properties and can also hinder investors seeking to sell or refinance these assets. Successfully navigating the challenges posed by the current environment requires careful planning and management by healthcare real estate developers. 

“At Appelt Properties, we’ve developed strategies and models that take these challenges into account. When we’re working with healthcare providers on their design, we have to factor in these increased costs and incorporate them into our incentive packages and rent.”

Priority on Facility Retrofitting

The outbreak of the COVID-19 pandemic in March 2020 exposed the unpreparedness of health systems and providers for the overwhelming surge of patients. To proactively address potential future outbreaks, many healthcare providers are prioritizing the retrofitting of medical buildings and other facilities. 

“Retrofitting is certainly one of the services we offer for older properties in need of modernization and upgrades,” says Appelt. “It’s a great way to help improve existing facilities and meet the increasing demand. There are several properties that we’ve rehabilitated and transformed into safer, modern  healthcare facilities.”

These modifications can include measures such as adding negative pressure rooms and isolation rooms to mitigate pathogen transmission, upgrading HVAC, integrating telemedicine capabilities, and creating multi-specialty shared clinics and workspace enhancing disinfection protocols, 

As challenges continue to arise, developers like Appelt will have to lean on their years of experience as specialists in the healthcare real estate field. 

“As Canada’s leading developer of healthcare facilities, we’re proud to pave the way for the industry to meet the growing demand and adapt to the evolving needs of healthcare facilities.”