April 24, 2025 | BOMA International, Ella Krygiel
Specialty-driven practices are on the rise. This is what the Flagship Team predicts, in addition to research by New England Journal of Medicine. Their studies discovered the following specialties to have experienced major growth: critical care medicine, sports medicine, interventional cardiology, vascular and interventional radiology and neuroradiology. As consumers continue to demand convenience and accessibility in their healthcare systems, specialty practices and the CRE industry as a whole are striving to keep pace. Healthcare providers, for instance, are seeking retail centers to improve patient accessibility. A recent GlobeSt article emphasized that certain types of providers like physical therapists, chiropractors, dentists, optometrists and veterinarians in particular are gravitating towards these “medtail” spaces.
With Flagship Healthcare Properties’ latest acquisition of a Class A, 100% leased medical outpatient building in Chattanooga, Tennessee (acquired through Flagship’s private real estate investment trust, Flagship Healthcare Trust, Flagship REIT), I asked the Flagship team their thoughts on these trends and more – as we continue to progress through the year.
“Health systems are increasingly moving care closer to where people live and work, which is fueling demand for well-located, high-quality medical outpatient space — particularly near hospitals and in growing secondary markets like Chattanooga, where Flagship recently expanded with our acquisition at 929 Spring Creek Road,” Flagship experts’ state. “Over the next three years, we see the medical real estate sector undergoing strategic growth and meaningful transformation. Driven by an aging population, ongoing provider consolidation, and patient demand for convenience, there will be a continued shift toward outpatient and ambulatory care facilities.”
A JLL report echoes Flagship’s prediction of increased outpatient facilities. They cite that the driving demand for this outpatient care is due to demographic trends, consumer preferences, and technology and reimbursement changes.
A majority of outpatient facilities are turning to these specialty practices. According to Flagship, they anticipate a strong momentum in women’s health, orthopedics and gastroenterology within the next three years in particular. Behavioral health is also seeing an uptick, with Forbes estimating that 25% of Americans will access behavioral health services by 2026.
“Development will likely focus on adaptive reuse opportunities and flexible, scalable facilities that can evolve alongside changing care delivery models, including the integration of telehealth and tech-enabled care,” the Flagship team states. “Sustainability will also play a growing role in how these facilities are designed and operated.”
Real estate professionals must balance patient convenience and location needs while integrating cutting-edge technology and AI to enhance overall efficiency. Staying ahead of these advancements is crucial.
With this in mind, the Flagship team provides strategies for effectively navigating the biggest issues of the healthcare real estate industry today:
- Collaboration: “Partnering early and often with healthcare providers, as well as our professional design and construction partners, ensures developments are aligned with clinical goals, operational efficiency, and long-term flexibility. It’s not just about delivering a building — it’s about creating a facility that actively supports better care delivery and patient outcomes.”
- Flexibility: “Embracing flexibility in design and site selection is crucial. Facilities must be able to adapt as technology advances and care models evolve. Modular layouts, scalable footprints, and infrastructure that supports telehealth and digital integration can future-proof assets.”
- Capital Discipline: “Capital discipline is more important than ever. With interest rates and development costs elevated, there’s a sharper focus on targeted, high-demand markets — like the Southeast — where population growth and provider needs support long-term value.”
- Sustainability: “Sustainability and resiliency are rising priorities — from energy-efficient systems to materials sourcing. These efforts aren’t just good for the environment; they’re also becoming increasingly important to health systems and investors alike.”
Overall, the Flagship team reports that medical real estate will become more responsive in the next three years — not just to healthcare trends, but to the needs and preferences of patients. “The healthcare real estate industry is facing a unique mix of challenges — from rising construction costs and labor shortages to evolving patient expectations and shifting provider business models. To successfully navigate this landscape, healthcare real estate professionals must adopt a blend of proactive, partnership-driven, and adaptable strategies. Ultimately, staying agile, forging strong partnerships, and keeping the patient experience at the center of every decision will be critical to meeting today’s challenges and positioning for long-term success.”
