This site has been created for exclusive use by institutional investors only and does not take into account investment objectives, financial situation or specific needs of any individual investor. Information should not be the sole basis for any investment decision.
If you are not an institutional client, consultant or financial professional and are looking for more information about mutual funds and other products at Nuveen, please visit our site at www.nuveen.com.
Past performance is not a guarantee of future performance. All investments involve some degree of risk including loss of principal. Investment objectives may not be met.
By agreeing you are confirming you are being truthful, acknowledging you have read the information above and accept the terms and conditions set out with this site and meeting the intended audience requirement for this site. Not all content on this site is appropriate or applicable for the general public and we cannot guarantee consequences with the use of this information by unauthorized or unintended users. Content on this site may not be redistributed and is for informational purposes only and does not constitute investment advice or provide a solicitation of an offer to buy any security.
Telehealth and the future of healthcare real estate
The awareness and utilization of telehealth accelerated throughout the COVID-19 pandemic as patients opted to interact with healthcare providers from the safety of their homes rather than in what was often perceived as ‘virus-ridden’ healthcare facilities. As a result of its widespread use and acceptance, telehealth will be a prominent fixture in the delivery of health care going forward. During the early stages of the pandemic, Teladoc, a telemedicine and virtual healthcare company, reported utilization stabilizing at a level 40% higher than before COVID. Additionally, Teladoc recently completed its $18.5 billion merger with Livongo, a digital healthcare company specializing in chronic conditions. Other companies entering the telehealth space include CVS Health, Walgreens and OneMedical. Overall, telehealth visits’ share of total visits remains well above pre-COVID levels (Figure 1).
In our view, telehealth will have the greatest disruptive impact on the lower-acuity segment of the medical office market as accelerated adoption has the ability to replace the majority of in-person visits for lower-acuity services. Medical offices oriented towards higher-acuity specialties are positioned to outperform the broader medical office market. Higher-acuity medical services tend to require a patient to be on-site for care, such as hip or shoulder replacements and chemotherapy.
Higher-acuity medical offices have historically boasted the strongest rent growth in the medical office market and, in our view, are the most defensive against the increased trend of telehealth going forward. In fact, telehealth usage across higher-acuity specialties remains very low while lower-acuity specialties remain the highest (Figure 2). Additionally, early during the COVID-19 pandemic, higher-acuity specialties’ operations were least impacted, according to Revista’s Landlord Observation of Tenant Impacts Survey. The lower-acuity and less needs-driven specialties were more impacted and had to suspend or severely limit operations.
Telehealth’s impact will not be limited to just medical office buildings. It will also affect senior living. The next generation of senior living facilities that foster and cater to technology’s accelerated role in the delivery of health care are best positioned for future outperformance. As a result of the pandemic, existing and future senior living residents have been forced to adapt to the new delivery of health care via telehealth. In particular, as baby boomers age into the senior living resident age cohort, they will expect and desire state-of-the-art facilities that focus on technology and the rapidly evolving delivery of health care. Senior living facilities that have designated space for on-site telehealth visits with trained staff are more likely to attract potential residents than obsolete facilities that do not.
The COVID-19 pandemic has undeniably accelerated technology’s role in the delivery of health care. We believe that investment opportunities in the highly specialized medical office segment and state-of-the-art senior living segment are best positioned for future outperformance in tomorrow’s world.