For the healthcare real estate sector, “2025 has really been a tale of two halves,” said Justin Shepherd, vice chairman & co-head U.S. Healthcare Capital Markets at Newmark. “I think the first half coming out in “Coming out of January, there was a lot of optimism. We were thinking rate cuts then. We obviously didn’t get them as quickly as we expected.”

Speaking on the “State of the Market” panel at Connect Healthcare Real Estate 2025 in Irvine, Shepherd said that as the year winds down, “There’s a lot of portfolios on the market, a lot of scale on the markets. And you’ve certainly seen the markets respond accordingly. So I think the back half will make up for what our 2025 view was in totality.” He predicted “a real push” between now and Dec. 31.

For Perkins&Will principal Chris Connell, the wind-down of 2025 means “a fairly steady, positive trajectory that probably belies the slightly rocky road that we’ve had below the surface to get there. I think there’s been less predictability this year than expected. That’s probably fair to say. But all in all, I think we’re coming out of it fairly well.”  

That being said, Big Sky Asset Management founder and CEO Jason L. Signor noted that while his company’s portfolio has performed solidly this year, from a capital markets perspective, activity is “still fairly muted globally, especially in the core-plus sector,” which represents the lion’s share of medical office and other healthcare-related properties.

“And unfortunately, other product types are taking precedence over medical today for the return risk spectrum,” he continued. “So that’s been really tough. And what we’ve done is gotten a lot more flexible in how we raise money.”

From a property investment standpoint, Signor predicted that Big Sky would wind up 2025 as “net neutral,” i.e., buying and selling pretty much the same number of properties. Asked by moderator Peter Becronis, partner in ShareMD, where investors currently stand on the value-add vs. stabilized spectrum, Shepherd said Newmark has been seeing some of both, depending on individual buyers’ return requirements.

As an investor, Signor said, “Today you’re looking for core-plus risk with value-add returns. And the key here is that we’re competing in medical mostly with a fixed income allocation within their portfolio, and unfortunately the private credit and the credit markets are still doing well on the total return. Like it or not, we can’t get to double returns on cash-on-cash with a total mid-teen return like you can in private credit today.”

That may be inherent in healthcare real estate, Shepherd pointed out. When it comes to achieving high returns, “it’s just not what it is by definition, but you certainly are seeing groups look for stability, look for resiliency and look for credit, where you can still get positive level accretion, specifically relating to your debt,” he said

He continued, “When you think about it from that dynamic, I would argue there’s very few actual silos in real estate today that you could invest in, like medical, that would check all those boxes. So, overall, I would say we are seeing investors lean in.”