Attending the Healthcare West Interface Conference in Los Angeles (February 18-19, 2025) provided valuable insight into the current and future state of healthcare real estate. Over two days of discussions with leading investors, lenders, and industry experts, several key trends and themes emerged. This year’s conversations reflected a market in transition, where capital is increasingly available, but investors and lenders remain selective in their strategies.
1. Will Healthcare Real Estate Investments Rebound in 2025?
A central theme of the Healthcare West Interface Conference was the potential for investment activity to recover in 2025. Many panelists acknowledged that 2024 was a challenging year, with transaction volumes lower than in previous cycles. However, optimism is building, particularly in core medical real estate markets with strong fundamentals.
One of the most telling data points was that total healthcare real estate transactions in 2024 remained consistent with pre-pandemic levels, albeit lower than the post-pandemic peak. Some experts argued that the market had already “come back” in terms of transaction volume, but high borrowing costs and tighter underwriting standards slowed activity in 2024.
In 2025, investment strategies are shifting. Many investors are focusing on stabilized, cash-flowing assets with long-term leases to health systems or creditworthy tenants. There is less appetite for riskier, value-add deals unless there is clear upside potential. Additionally, private equity-backed healthcare groups have created both investment opportunities and challenges, as some struggle with financial performance, making their real estate less attractive to institutional buyers.
2. The 2025 Lending Outlook: More Capital, More Competition
If there’s one thing that was clear from the conference, it’s that capital is not the issue in 2025—it’s the deployment of capital that remains the challenge. Lenders across the board, including life companies, regional banks, and debt funds, reported increased allocations for healthcare real estate lending this year. Some institutions are doubling their healthcare lending targets, signaling a strong appetite for deals.
The impact? Highly competitive lending terms. Spreads on investment-grade medical office buildings (MOBs) and healthcare assets have compressed, with some deals pricing as low as 130-150 basis points over treasuries. In the debt fund space, bridge loan pricing has also tightened, with some spreads now below 300 basis points.
Construction financing, while still selective, is also seeing more flexibility, particularly for projects near major health systems or with strong pre-leasing commitments. Developers who can lock in lower-cost debt or secure forward takeout financing will have an advantage in navigating the rising construction costs that continue to challenge new development.
3. Investment Trends: What’s Driving Healthcare Real Estate in 2025?
Another major theme was the shifting priorities of investors. Historically, healthcare real estate has been viewed as a defensive, stable asset class due to long-term leases, predictable cash flows, and strong tenant retention. However, investors are becoming more cautious about tenant credit and operational risks.
Consolidation among physician groups and health systems has changed the landscape, with some operators struggling to remain profitable under private equity ownership or reimbursement changes. Investors are now more focused on tenant creditworthiness, particularly in ambulatory surgery centers, specialty care facilities, and behavioral health properties, which continue to see strong demand.
Another area of discussion was adaptive reuse and conversions. Given the decline in traditional office demand, many investors and developers are exploring converting office buildings into medical uses. While this strategy presents challenges around zoning, building infrastructure, and financing, those who can execute it successfully may find attractive opportunities in markets where medical space is undersupplied.
4. Capital Markets & Transaction Outlook: A Cautiously Optimistic Year
While interest rates remain higher than historical averages, there is growing stability in capital markets, which could drive a rebound in transaction volume. Many investors and lenders at the conference expressed optimism that Q3 and Q4 of 2025 could see an uptick in deals, particularly as interest rate expectations become clearer.
One of the key takeaways was that total healthcare real estate transactions in 2025 are expected to exceed $15 billion, with core markets like California, Texas, and Florida leading the way. Portfolio sales are also expected to return, after many were put on hold in recent years due to higher capital costs and valuation mismatches.
However, a few risks remain. Some panelists pointed out that Medicare and Medicaid reimbursement changes, policy shifts, and labor shortages could create headwinds for healthcare operators, which in turn impacts real estate performance. Additionally, rising construction costs and regulatory challenges continue to make new developments more expensive and complex.
Final Thoughts
The Healthcare West Interface Conference provided a clear snapshot of an industry at an inflection point. While capital is widely available, investors and lenders are more disciplined and highly selective in their decision-making.
Those who succeed in 2025’s healthcare real estate market will be those who adapt their strategies – whether by focusing on strong credit tenants, structuring more flexible deals, or leveraging creative capital solutions. Despite economic uncertainties, healthcare real estate remains one of the most resilient asset classes, and opportunities exist for those who can navigate the shifting landscape strategically.
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