The BOMA Conference in Denver, Colorado, brought together medical real estate industry leaders for three days filled with insightful conversations and engaging panels. Overall, the tone was cautiously optimistic, with many industry experts anticipating that medical real estate deal volume will pick up in the second half of the year. Several themes circulated throughout the conference across the panels and attendees: the slower M&A market in the first half of 2025, the rise of new construction and the state of the lending market.
Why has M&A volume dropped?
The LevinPro HC team spoke with Edward Finkenstaedt, Senior Risk Manager and Team Leader of Siemens Financial Services, who provided insights into the ever-changing lending and healthcare M&A market.
“There has been lower deal volume in 2025 because there have been few opportunities,” said Finkenstaedt. “From my perspective, assets appear to be trading in greater bulk (i.e., portfolios) than in the past.”
According to data captured in the LevinPro HC database, 78 Medical Outpatient Building transactions have been reported since the start of 2025, a significant decrease in activity compared with prior years. Further, approximately 52% of assets have been traded in a portfolio deal, according to our data, supporting Finkenstaedt’s observation.
Macroeconomic headwinds are also taking a toll on deal volume. With shifting regulations, tariffs and interest rates, investors and lenders hesitate to deploy a large amount of capital without being reassured that the profit will be there.
Should investors build instead?
Another topic that circulated throughout the conference was the prevalence of construction to meet the high demand for medical real estate.
Finkenstaedt believes that there will be a rise in new construction, centered explicitly on hospital off-campuses.
“Health systems continue to develop off-campus facilities as part of their growth strategy, in general,” he said. “Increased construction costs have not dampened development activity, from my perspective. The effects of tariffs have yet to be seen.”
A speaker from the panel “Redefining Healthcare Spaces Through Adaptive Reuse” echoed this idea, saying that they suspect investors and their companies have already put aside capital for new construction that will be focused on long-term investing and provide facilities with long-term tenants, potentially stabilizing a shaky market.
Additionally, Finkenstaedt believes that the rise in new construction will be centered around hospital campuses to meet the demand for outpatient services.
One of the panelists from “How to Run an Effective RFP” spent a fair amount of time discussing the importance of different zones for outpatient real estate. The speaker noted that the closer the facility is to a hospital, the stricter the buy-back options are in place so that older construction doesn’t “stand in the way of progress” and new construction can be built closer to hospitals, when the demand calls for it.
Finkenstaedt and speakers tended to be optimistic about the new construction, but there were some worries. Finkenstaedt spoke of the concerns about cost containment and tariffs regarding new construction. At a certain point, construction costs may be too high to build new facilities, so owners may rely on pre-existing buildings.
“It’s important to manage the budget to counter risk, if costs get too high,” he said.
The state of the lending market
“A competitive environment amongst lenders creates challenges,” Finkenstaed said.
A highly competitive environment for lenders can lead to lower interest rates or tighter loan spreads. This compresses profit margins, as lenders loosen underwriting standards or take on greater risk to turn a profit.
In terms of market conditions, CAP rates, according to Finkenstaedt, are “trending downward and unevenly,” especially in comparison to where they were this time last year. Overall, lower CAP rates are a good thing as they suggest higher property values and favorable market conditions.
That said, the people we spoke to were generally optimistic that the rest of 2025, and even 2026, would turn around in healthcare real estate deal volume. One of the underlying reasons is that as investors become more comfortable with the interest rate and tariff environment, they will feel more confident in announcing deals.
“The dynamic market change led me to ask questions such as ‘Am I asking the right questions?'” Finkenstaed said. “Am I looking at deals the right way? Is how I’ve thought about deals in the past the way I should think about them now?”
