Posts Tagged ‘commercial real estate’

Bad News for Jobs Due to ObamaCare? Take the Long View.

Wednesday, February 12th, 2014

So, it’s been a rough January — a second month of anemic job creation, a new CBO report saying that ObamaCare could cost 250,000 jobs and continuing blasts of arctic froideur that have shut down even the redoubtable Alter Group offices for days.

This is when perspective matters: Cassidy Turley takes a 6-month long view in the US Employment Tracker to find good news:

Taking this approach, the U.S. economy is creating a monthly average of 178,000 net new jobs, consumer spending is growing at an annual rate of 3.1% and the ISM manufacturing index has been a robust 60.6.” Also, after the usual revisions in the economic data, we found that “real GDP grew at an annualized rate of 3.2% in the final quarter of 2013, driven by the largest increase in consumer spending in three years. Business confidence is now at an 11-year high; consumer confidence has held up; fiscal policy is less of a drag; and the Fed is now tapering because it generally likes what it sees. Commercial real estate fundamentals have been consistently tightening for three straight years. Although the past few weeks have allowed some doubt to resurface, the outlook remains upbeat.

Then there’s the matter of looking at the right statistics for you. Such as the fact that office-using jobs that drive so much of commercial real estate have been on a tear recently — 34,000 in January. Overall office-using jobs have surpassed pre-recession levels (after bottoming out in 2009).

We can’t take a long view on bone-chilling temperatures but let’s look at the Obamacare costing a quarter million jobs. Here’s portion of the CBO report, “The Budget and Economic Outlook: 2014 to 2024.”:

The ACA’s largest impact on labor markets will probably occur after 2016, once its major provisions have taken full effect and overall economic output nears its maximum sustainable level. CBO estimates that the ACA will reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 percent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labor —given the new taxes and other incentives they will face and the financial benefits some will receive.

And therein lies the key phrase — “choose”. In other words, it is not jobs that will be eliminated but workers who will elect to retire, stay at home to raise the kids or go to a 3-day schedule so they have time to get another degree. They won’t feel tethered to their current employment because of the fear of not having health coverage.

Healthcare Reform Passage a Boon to the Development Industry

Thursday, July 8th, 2010

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.

Medical Office Buildings a Sound Investment, Despite Recession

Thursday, July 23rd, 2009

In an environment where flat is the new up in the world of commercial real estate, medical office buildings are performing better than other properties.  In May, Industry Insights published two papers written by the Houston-based investment firm, Cain Brothers, which stated that this is a good time for health systems to sell real estate assets to raise needed cash.kaiser-_office_interior1-copy

Make no mistake, medical office building values are showing some slippage.  “We’re seeing values go down, but nowhere near what is going on with traditional office buildings,” said Tom Dalcolma, a partner in Street Sotheby’s Medical Realty Advisors.

A Real Capital Analytics study performed in May found that three percent of commercial office buildings were in bankruptcy, foreclosure or some form of distress.  Only one percent of medical office buildings were in similar straits.  Medical office building sales volume fell 20 percent over the past 12 months, compared with 51 percent for other office buildings.  The report concludes:  “Medical office properties have proven to be a safe haven, and this niche has little trouble.”

Interest in medical office buildings is growing because investors recognize that healthcare spending is not being impacted as harshly as the rest of the economy.  As minor medical procedures move from hospitals to offices, the demand for new facilities is increasing.  There were 600 million outpatient visits last year.  And that will only increase as the population swells by 45 million during the next 10 years.