The healthcare real estate market is showing promising signs of recovery and growth as we move through 2025. According to a recent analysis by Cushman & Wakefield, the sector is poised for expansion, driven by strong fundamentals and improving market conditions. This resurgence is evident in three critical areas: financing, pricing, and buyer activity.
The market's momentum is palpable, with sales volume in 2024 having surged by an impressive 61% year-over-year. This robust foundation is expected to support continued growth throughout 2025, underpinned by the solid fundamentals of healthcare properties.
While the Federal Reserve remains cautious about rate cuts due to inflation concerns, C&W project 50 basis points for cuts in 2025 and 2026. This relative stability allows investors and developers to plan more confidently, despite lingering concerns about potential tariff-induced inflationary pressures.
Liquidity, tight in 2024, is showing marked improvement in 2025. Loan origination volume is up 7.4% year-over-year, with healthcare origination nearly doubling last year, though it still lags 20% behind the 2017-2019 average.
Pricing dynamics are also stabilizing, painting a clearer picture for investors. As of November 2024, overall property pricing was down just 0.5% year-over-year, significantly improving from the 7.4% decline observed in November 2023.
This increased market activity is aiding price discovery, with the potential for upward pressure on prices. Cap rates are also expected to stabilize, making rational investment choices more straightforward.
As for the buyers driving this market recovery, private equity firms and real estate private equity advisors are projected to be the primary actors in 2025. Their activity in 2024 was somewhat subdued compared to the previous eight-year annual average, partly due to a decrease in 1031 exchange transactions. However, their renewed interest signals growing confidence in the sector's potential.