Healthcare Reform Passage a Boon to the Development Industry

Healthcare reform could mean 60 million SF of new ambulatory healthcare facilities.  With the narrow 219 – 212 passage of healthcare reform legislation by the House of Representatives, its positive impact on commercial real estate is becoming clear. Jeffrey H. Cooper, an international investment banker who specializes in healthcare facilities with Savills, believes that the potential exists to develop more than 60 million SF of new medical office buildings.

Cooper believes that passage of the healthcare reform bill will impact four areas:

  • With 30 million new insured Americans seeking healthcare, the need for medical facilities to serve them will expand.
  • By using the standard multiplier that calculates that each new outpatient requires 1.9 SF of medical office space, 30 million newly insured individuals will require that approximately 57 million SF be constructed.
  • As reimbursements for inpatient treatment are reduced, there will be a simultaneous need for the development of new ambulatory treatment facilities and medical office buildings.
  • As the demand for new capital projects grows, hospitals will seek out third-party financing and ownership.  This is particularly true in cases where tax-exempt bond financing is not available.

With more than 30 years of real estate investment banking experience, Cooper is likely on the right track here.

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