By David Cohen

In the midst of the ongoing COVID-19 pandemic, it’s not a leap to think that the medical office asset class would be thriving. However, while the long-term view remains bright, the sector has been not without challenges of late.

The impact of the recent health crisis has seen a severe wave of job losses leading to a significant disruption to health insurance coverage. In addition, the shutdown of elective procedures and nonessential services forced many medical offices to stop seeing patients.

In April, outpatient hospital visits were down 64% according to research from Marcus & Millichap, and routine disease management and screenings fell by more than 65%.

“It’s really cut into the activity level for doctors and dentists as well as the entire medical industry,” said John Chang, senior vice president of research services at Marcus & Millichap, speaking during the firm’s June 3 webcast on the current outlook for the sector.

“At the same time, it has created a new normal. If you go to the doctors office today, they don’t allow people to wait in the waiting room. So, we’re seeing some real big changes that are affecting the operations of the medical office industry.”

In addition to a lack of waiting rooms at medical offices, other changes have included an increase in the use of telemedicine, which has spiked in the onset of the pandemic and could lead to wider adoption in the future.

Panelists on the webcast included Alan Pontius, senior vice president of office and industrial at Marcus & Millichap; Brian Howard, president at Stage Equity Partners and Daniel Klein, senior vice president of investment and deputy chief investment officer at Physicians Realty Trust.

Speaking on telemedicine, Dan Klein of Physicians Realty Trust said that while many view the growth of the technology as a negative for bricks and mortar, his team views it as a positive.

“There’s a place for telemedicine in healthcare for sure, and the Corona Virus pandemic has really accelerated the adoption of that for sure and I think it is here to stay,” he said. “In terms of square footage, we could see a similar thing happen as what we saw with records rooms when electronic records replaced all of the hard copies of files. That space didn’t go away, but most of it was reallocated to exam rooms, physician offices and break rooms. That could be what happens to some of the spaces in suites for telehealth.”

On the whole, the experts on the panel agreed that in the long term, medical office properties will recover. Over the next decade, the number of individuals 65 and older in the United States will increase by 31%. The use of medical facilities dramatically increases as people age, creating a multiplier effect.

“We can’t lose sight that yes we are going through a challenging period, and yes there are headwinds facing our industry right now,” said Marcus & Millichap’s Chang. “But, that the long-term demand drivers will play through over time.”

Replays of the webcast are available by clicking here.

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For comments, questions or concerns, please contact David Cohen