At the BOMA Conference earlier this month in Denver, Colorado the LevinPro HC team had the pleasure of speaking with Marianne Skorupski, Director of National Office Research | U.S. and Shawn Janus, National Director of Healthcare | U.S., at Colliers.
During our conversation, we spoke about the healthcare real estate market, their expectations for the future and current trends impacting the space.
One major theme of our conversation was how AI will impact the outpatient care market for providers, patients, and real estate investors. Skorupski spoke about how the advancement and integration of AI and other technologies (such as payment digitization and robotics) are becoming an integral part of the emergency room and doctors’ practice experience.
Both Skorupski and Janus said that many doctors are embracing these changes because AI is efficient and helps with the physician-patient imbalance, which has arisen due to physician burnout. Janus also addressed the fact that hospital-owned practices are integrating AI as soon as possible because it could potentially assist with better care delivery. Additionally, AI is a factor driving both patients and physicians to outpatient care facilities for certain procedures, along with lower cost and convenience.
However, Skorupski also addressed some potential concerns that lenders and investors may have about integrating these advancements into medical office space.
“There are challenges, especially when it comes to a pre-existing facility,” she said. “Can the facility be adapted to host the new technologies and power structures? Is there support for the cable lines for internet and Wi-Fi? Is there even space in the building? These are starting to become a bigger part of the conversation.”
Throughout the BOMA conference and during our conversation, the idea of converting traditional office spaces into healthcare real estate spaces came up frequently. As new demand for traditional office space remains limited post-COVID, property owners are appealing to medical users. In many cases, this would be the first time the space is utilized as a healthcare setting.
Janus also noted that many hospitals will start with practices such as primary care and internal medicine, before adding specialty practices like orthopedics, affording tenants the opportunity to figure out the logistics of the space.
But with increasing costs of construction, wouldn’t some owners want to convert old facilities instead of building a new one? Skorupski said that the cost of conversion is a factor when deciding to convert or develop, but not the only one.
“The main factor is convenience. It’s part of an effort to get close to the patient,” said Skorupski. “Since COVID-19, there’s been lower demand for traditional office space; the use of brick-and-mortar space has declined, and owners are reconsidering what the space can be used for.”
However, Skorupski did say that there has been less conversation than anticipated. This is partially because a large portion of office space doesn’t meet the requirements to become medical real estate. Janus also noted that conversion offers a faster timeline for physicians.
Janus, however, did touch upon some additional challenges facing owners when thinking about converting. “Parking is a huge issue,” he said. “Even if the building could be converted, that doesn’t mean there’s enough parking for the facility to support medical real estate space which typically requires a greater parking ratio.”
This is particularly true in urban areas where the demand for parking is elevated and availability is already limited. He noted that throughout the end of 2024 and in 2025, there has been a slower period of development as cost, interest rates, increasing pay, and labor constraints play out.
Additionally, Janus spoke about the burnout that nurses and physicians are feeling. More physicians are retiring, and fewer people are applying to medical school.
“Many hospitals are having trouble staffing their operations,” he said. “So, why build a building if you can’t staff it?”
The obstacles to new development and converting office space have turned the attention to converting retail space into medical office space. Retail spaces typically have characteristics more favorable for conversion to medical space (ceiling height, open floor plans, greater parking ratios).
However, they did not say that there would be no new construction, just not as much as one may have thought.
When speaking about investment deal volume in the market, both Janus and Skorupski were cautiously optimistic for the rest of 2025.
“Q1 was good overall, but I am still hopeful it will be better in the second half of the year and into 2026,” said Janus.
The optimism is based upon investors looking for certainty and stability in their investments, and healthcare real estate is appealing from that perspective, especially given the growth in the outpatient services sector. There are more and more new investors getting into the space, increasing the demand for available product.
Janus believes that investors have adopted an ‘I can work with this’ attitude as market conditions have begun to settle, which can help lead to M&A growth.
Going forward, Skorupski believes that many of the transactions will be single-tenant and single-facility deals, despite a high interest in portfolio deals.
“The supply just might not be there,” she said.
