Labor costs won't impact mob investors

Alliance keeps a close eye on the healthcare industry, to understand our tenants and assess what changes might impact our investment strategies.

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Recently, we’ve seen a big spike in healthcare labor costs.

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The healthcare labor market has been tight ever since the early days of the pandemic. When everything else was shutting down, demand for doctors, nurses, physicians assistants, administrators, and every other kind of healthcare worker spiked.

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With the pandemic behind us and the economy making a strong recovery, now the entire labor market is tight. Unemployment is at historic lows, the stock market is at historic highs, and GDP is booming.

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Under these conditions, it’s no surprise to see that healthcare businesses are struggling with high turnover and rising labor costs. So what does this mean for medical office building (MOB) investors like us?

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Thankfully, the answer is very little.

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The whole medical industry is thriving and highly profitable. Higher labor costs and churn may be hitting the bottom line for medical businesses, but they’re not passing through to MOB investors. Demand for medical facilities remains high and lease defaults are extremely low.

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High labor costs are stimulating a few responses. We’re seeing the medical industry recruiting more workers from other sectors. Of course, they also need to offer the right compensation to attract and retain these workers. We can also see a long term push for more efficiency.

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Like almost every other sector, medical businesses are finding a variety of new ways to use new technologies to produce more value from the same labor. Digital note taking and medical records and more automated scheduling systems are low hanging fruit for many medical businesses. I also expect to see more AI-powered tools to help with patient monitoring and diagnoses, over time.

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As important as these developments are for the medical industry, none of them have a significant impact on the need for a physical footprint (MOB) or the ability to pay rent.

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The labor market squeeze is real, but for MOB investors, it’s a non-factor. Our investors’ capital is safe and we expect continued excellent returns.

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Frequently Asked Questions (FAQs)

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Why invest in medical office buildings?

Investing in medical office buildings (MOBs) remains one of the best commercial real estate investment opportunities for long-term stability and wealth creation through property investment. MOBs are considered low-risk commercial properties because healthcare tenants deliver consistent revenue regardless of market shifts or rising labor costs. These medical real estate investments typically outperform other types of commercial real estate, offering strong ROI on commercial real estate and minimal vacancy. Understanding commercial real estate risks, commercial property market analysis, and depreciation schedules ensures investors achieve sustained, recession-resistant returns.

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How to invest in medical office buildings?

To invest in medical office buildings, start with a thorough commercial real estate investment analysis and real estate site selection criteria. Evaluate location proximity to hospitals, tenant creditworthiness, and lease structures  key factors in commercial real estate investment strategies. Investors should also understand what is MOB in healthcare, review commercial property depreciation life, and apply proven commercial property investment strategies for consistent growth. Combining cash real estate transactions with long-term industrial real estate investment strategies can diversify portfolios and strengthen overall wealth building through real estate.

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What is the major trend in the healthcare industry today?

The biggest trend shaping the healthcare real estate investment market is the surge in labor costs and the sector’s adoption of AI-powered technology to increase efficiency. Hospitals and clinics are using automation, digital records, and smarter scheduling to offset staffing challenges key developments in commercial real estate background and risk management in the real estate industry. Despite these pressures, medical office buildings continue to perform strongly, as essential healthcare services sustain tenant demand and stable rent. For commercial real estate investors, this reinforces the resilience of MOB medical office buildings compared with other sectors of commercial real estate, such as retail or industrial properties.

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When to sell your medical real estate investment?

The best time to sell a medical real estate investment is when commercial real estate market analysis indicates peak property valuations and strong investor demand. Experienced commercial real estate investors assess interest rate trends, lease expirations, and commercial real estate depreciation years to time their exit effectively. Monitoring commercial real estate retail trends, multifamily property valuation, and industrial real estate definition can help identify when to rebalance portfolios or capture appreciation. Selling strategically allows investors to free capital for new commercial property investment opportunities, advancing long-term wealth by real estate and sustained portfolio performance.