The investment landscape for medical real estate is benefiting from changes demographics and in healthcare delivery, according to Cody Shandraw, President of Healing Realty Trust. The company has leveraged these to double its asset portfolio in nine months by focusing on a targeted niche within the medical real estate sector.
Market Overview
“The silver wave is here, right? 65 is kind of that golden number where 10,000 people are hitting that every single day as the baby boomer generation gets older,” said Shandraw, who has experience in both venture capital and real estate investment. “Those people are living longer. What does that mean? They’re going to the doctor more and for a longer period of time.”
The medical real estate market has shifted toward outpatient facilities, with data showing a sustained change in healthcare delivery since 2011 that outpaces traditional hospital-based care.
Key Investment Factors
Shandraw outlines several key considerations for investors evaluating opportunities in the medical real estate sector:
Recession Resistance: Medical offices and outpatient centers tend to perform well even during economic downturns. As Shandraw notes, essential procedures sucha as dialysis or orthopedic surgeries, can’t be easily replaced or moved into home settings, making these assets inherently stable.
Specialty Center Shift: The growing preference for specialized care has redirected traffic away from traditional hospital emergency rooms toward urgent care and specialty outpatient clinics. Patients increasingly seek focused expertise rather than general services, driving demand for these smaller, purpose-built facilities.
Market Size Strategy: Shandraw explains that targeting mid-sized properties, typically ranging from a few million to the mid-tens of millions, offers a competitive advantage. By focusing on assets near major hospitals but below the institutional acquisition threshold, investors can tap into a resilient and expanding niche within healthcare real estate.
Emerging Opportunities
Shandraw emphasized that outpatient specialty centers are showing strong potential, citing the shift in patient behavior and healthcare delivery. “They’re going to be specialty centers in and around the hospital in their communities. They’re not going downtown to get their health care,” he explained.
Healing Realty Trust focuses exclusively on medical real estate properties with established cash flow, avoiding development risks and zoning complications.
Risk Assessment
For those considering investments in medical real estate, Shandraw identified Medicare and Medicaid policy changes as a critical area to monitor. “This administration has wanted to make some changes to those so the markets that we’re focused on maybe don’t have the same, you know, high rate of Medicare and Medicaid coverage, you know that you maybe would have been more interested in 12 months ago,” he noted.
Interest rates also remain a factor requiring attention, though Shandraw believes “rate cuts are coming.”
Return Expectations
Shandraw advises realistic expectations for returns in this asset class. “Listen, it’s boring, right? Like, you’re buying X and you’re generating y. Like, it’s a very stable and predictable. This is never going to 20x at an exit. But, like, Listen, if you can clip a nice coupon in between, which is what most people, like our investors age, are looking for. And you have, you know, a potential 234, x multiple at a liquidity event,” he said.
This approach to outpatient medical real estate investment offers stability and predictability, making it appealing to investors seeking steady income and moderate growth potential.
