By Jeff Wardon, Jr., Assistant Editor

The healthcare industry is ever-changing. With this flow of changes comes a bevy of challenges as well, all which will shape the future of healthcare real estate. Such challenges include balancing expansion with financial constraints, the sustainability of office and retail conversions and technological disruptions.  

These challenges aren’t unexpected or without solution, however. To navigate the shifting healthcare real estate landscape, Healthcare Facilities Today spoke with Matthew Coursen, executive managing director, market leader, mid-Atlantic healthcare group at JLL, about the challenges outlined in JLL’s 2025 Medical Outpatient Building Perspective. 

HFT: With health systems accounting for nearly half of tracked medical outpatient buildings (MOB) leases and leading new construction starts, how are hospitals balancing expansion with financial constraints like declining reimbursements and tight operating margins? 

Matthew Coursen: It’s challenging for them to balance those things. It’s really all about concentrating the investment dollars in where they’ve got the highest ROI for services. We’re also seeing a lot of mergers and acquisitions (M&A) in the hospital and health system space, so you're continuing to see those groups merge. What a lot of are finding is that M&A activity is sometimes a faster path to seeing growth in a particular service area and market share growth. 

That’s one way to combat the margin compression, which leads to lower capital expenditure budgets for hospitals. So, if they can acquire a group, it’s a bit of a different tactic. Another way to keep capital expenses down when it comes to building facilities is to try to find medical space that’s already built which will usually lead to fewer dollars spent renovating.  

HFT: Given the limited availability of purpose-built MOBs, some healthcare providers are exploring office and retail spaces. What challenges come with these conversions, and are they a sustainable long-term solution?   

Coursen: Very often, the retail and office properties were not built initially to handle the foot traffic, the power or the utility requirements. Medical spaces usually have things like backup power, different water and sewer lines, HVAC and other mechanical requirements for medical aren’t usually baked into the retail and office properties when they were originally built. Those are some of the hurdles that we see with construction. 

Related: Outpatient Facilities Spur Opportunities for Facilities Managers

Also, for instance, converting big box retail stores to medical use comes with a certain set of challenges. One example is windows – a lot of those spaces weren’t built with a lot of windows or natural light, so those have to be punched in. Then with HVAC, the systems were built to condition a retail space with a 30- or 40-foot clear height. However, the medical environments usually have to have drop ceilings put in, so you’ve got to really build out an entirely new HVAC system in those spaces. 

Additionally, any time you’re dealing with the utilities to a building, you’re dealing with the municipality or the power company, which can delay the schedule quite a bit and add costs to the overall project. 

Do I see this as a sustainable long-term solution? I do. I think the retail environment is shifting every day and allowing for medical or other uses within their spaces as opposed to an exclusively retail use. I do see that as something that’s sustainable at least until new construction for medical property comes back up as a viable option right now. The construction starts are very low, so the health systems and hospitals don’t have a lot of options out in the marketplace. So, renovating other property types tends to be their best option in the market. 

HFT: The report notes potential challenges such as the shift to home-based care, telehealth and policy changes. How might these disrupt the demand for medical outpatient buildings in the coming years?   

Coursen: Any time healthcare services can be delivered at home or delivered virtually, there is a chance for that to impact the brick-and-mortar physical environment. Until there’s widespread regulatory changes to how reimbursements are handled for virtual visits and home health, we might not see a widespread impact to the physical clinical environment. At the end of the day, folks are most likely going to need to be seen by a physician in a physical clinical space. 

What we saw during the COVID-19 pandemic was a rapid adoption of virtual care. Then as soon as clinics were available again to people, the telehealth and virtual visits dropped off dramatically. I think that it’s unlikely to have a major impact on in person outpatient. However, with technology, AI and other innovations in this space, I think it’s reasonable to expect to continue being a disruptor. The effect and scale of that disruption is probably unknown as of now. 

Jeff Wardon, Jr., is the assistant editor of the facilities market.