Ground-Up Medical Development Slows, But Smart Projects Still Win

It’s no secret—new medical development projects aren’t flying off the shelf the way they were a few years ago.

And it makes sense:

→ Construction costs are still high.

→ Interest rates are squeezing margins.

→ Lending is tighter across commercial real estate.

But here’s what’s important: ground-up development isn’t dead. It’s just getting smarter.

Instead of speculative medical office buildings popping up everywhere, we’re seeing much more focused plays:

• Build-to-suit projects for large behavioral health operators

• Strategic expansions for senior living campuses

• Surgery centers and outpatient hubs in underserved markets

• Medical retail conversions where demand supports it

In short — if there’s real tenant commitment and demonstrated need, projects are still moving.

If it’s speculative? It’s sitting.

For healthcare real estate investors, this means two things:

1. New supply will stay relatively constrained for the next 12–24 months.

2. Properties tied to strong operator partnerships will keep commanding premiums.

From a valuation standpoint, this tightening of the development pipeline could create pockets of rental rate stability—or even modest growth—in certain healthcare sectors. Especially where existing inventory can’t meet the operational needs of expanding providers.

It’s not a bad time to build. It’s just a bad time to build without a plan.

📅 Book a call if you’re evaluating a healthcare development deal and want a real-world valuation perspective.

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