Four reasons to add a medical asset to your commercial real estate portfolio

By Greg Bell

While there are few certainties in life, the need for healthcare is among them. And every type of medical professional has to work somewhere — so shouldn't it be in a building you own?

Investing in the largest single sector of the Australian economy is more attractive than ever, in part because of the deficits of certainty pervading society during the global public health crisis. Healthcare represents 10% of the total GDP of the Australian economy, the Melbourne Institute reports. Healthcare also employs more people than any other sector of the economy. At least 13% of the total working population of Australia goes to work each day in a job related to healthcare.

Healthcare isn't just hospitals, either — nor is it about only public hospitals. Of the 1,350 hospitals in Australia, 657 are privately run. This says nothing of general practice offices, optometrists, dentists' offices, radiology plus pathology facilities, psychiatry offices and paediatricians.

So why are medical assets worth your time to carefully assess and consider for your investment portfolio?

The medical sector pays relatively reliable dividends. Cultivating opportunities to have medical tenants can expose you to the steady uptick in the growth of the healthcare sector. In the stock market, Citi Australia saw a 350% increase in investments in the Aussie healthcare basket. This topped a 229% increase in international healthcare.

These investments in medical innovation combined with the human needs that come with increasingly longer lifespans are paying off as the sector grows. There are presently more than 1.8 million people employed in this industry, a figure expected to rise to 2.0 million by 2025, says the Australian Skills and Industry Committee.

Many of these employees work in the private sector. At least 55% of Australians have supplementary private sector insurance for issues like chiropractic, physiotherapy and home nursing care, the Commonwealth Fund reports.

This sector is one of the most recession-proof out there. Quite simply, the medical field is not as susceptible to fluctuations in the economy as some other sectors, so professionals in this field make great tenants. In the pandemic, for example, retail and even food-based businesses like cafes may have been hamstrung by public health restrictions. This is less true for medical practitioners; demand for dentists and optometrists will always persist. Having tenets who profit from necessary spending versus discretionary spending will mean reliability and stability for you as a landlord.

Maintain longer tenancies
Medical professionals require specific equipment. The cost of fitting out your space with their required equipment will likely be high — but this will motivate your tenants to remain in place. It's so expensive to kit out an office with medical-grade equipment that once your medical professional is set up, it becomes expensive for them to leave — adding to the likelihood of a reliable long-term relationship between landlord and tenant.

Enter the market at any level
Speaking of equipment, there are many types of medical offices. It's possible to court paediatricians and general practitioners who don't need excessive amounts of heavy, bulky medical equipment or specific freezers or other energy-sapping appliances.

This gives you a chance to expose yourself to the positive aspects of medical assets in an incremental fashion.

If you'd like to know more about how medical tenancies can benefit your goals in the commercial real estate sector, please contact us today to learn more about how we can help ensure you are fully prepared for investing in this sector. Our team at Ray White Surfers Paradise is fully prepared to help you maximise your opportunities.

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