SCOTTSDALE, AZ—During the opening keynote session of the GlobeSt. Healthcare conference at the Andaz Scottsdale Resort on Tuesday, John Chang, Senior Vice President of Marcus & Millichap, shared insights into market dynamics, emerging opportunities, and trends while offering a comprehensive outlook for 2024. Addressing the audience, Chang emphasized the significant challenge posed by the constant barrage of negative news in the media.
"We are inundated with negative news every day," he remarked. "There is a constant stream of concerns and potential disruptions. It's easy for the negative media coverage to influence decision-making. Despite this, there are positive developments worth noting."
Reflecting on the previous year, Chang recalled the widespread predictions of an impending recession and a steep downturn. However, economic expectations for 2023 have steadily improved, and the current outlook indicates a potential soft landing. "Despite challenges such as headlines, inflation, and more, the economy is outperforming expectations. We anticipate a softening, designed to achieve a controlled descent close to zero without going negative." As for inflation in particular, he said: "Compared to where we were a year ago, the outlook is positive."
Examining job numbers, Chang noted a steady decline, with the Federal Reserve actively working to slow down the employment market. In the healthcare sector, which constitutes approximately 25% of the total, job creation is a particular challenge, he said.
Despite being one of the fastest-growing segments of the economy, the healthcare industry faces a nationwide labor shortage, with specific difficulty in finding employees, Chang explained. "This shortage, while a sign of growth, also presents a substantial challenge to the employment market in the sector."
Although there has been a decline in wage pressure, Chang believes it could shift upward again due to the significant labor shortage we are experiencing. He said this could highlight the potential for increased wage pressures in the future.
Chang emphasized the growing demand for medical services, citing the aging population as a significant factor contributing to the steady rise in healthcare needs.
"People are aging every day, and those aged 55 and older represent the majority of total healthcare spending, a trend expected to continue increasing," Chang explained. He highlighted the escalating healthcare expenditures at a national level as a key driver for the demand in medical office space. "We anticipate this trend to persist over the next few years, resulting in upward pressure on vacancy rates. Notably, growth markets in the southern regions, due to increased development, are witnessing higher vacancy rates," Chang said.
Drawing a comparison between medical office and traditional office spaces, Chang underscored a compelling narrative, noting that while regular office vacancy rates are surging rapidly, especially in large urban constructions from the 1980s, medical office spaces demonstrate more resilience both in terms of performance and transactions. "Medical office spaces continue to outperform other sectors."
Check back with GlobeSt.com for more from the GlobeSt. Healthcare conference.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.