Why Expansion Plans Can Be Riskier Than Vacancies

Vacancy is usually treated as the biggest risk in medical real estate. Empty space makes people nervous. But what is often overlooked is that expansion plans from tenants can sometimes create even more uncertainty than a dark suite.

When a health system or physician group signs on for new space, the numbers on paper look great. Higher occupancy, more rent, and stronger apparent stability. Yet if that tenant is expanding beyond its ability to recruit physicians, if reimbursement is tightening in its specialty, or if referral networks are not keeping pace, that expansion can turn into financial drag.

I have seen more than one property where the bold expansion that was supposed to secure long term stability actually created stress when the tenant could not fill the rooms or sustain the program. The rent checks were there at first, but cracks started showing quickly.

This is why valuation requires more than counting leased space. Market intelligence helps you test whether growth is truly sustainable or whether it is a risk dressed up as opportunity. A vacancy tells you what it is. Expansion sometimes hides its weaknesses until it is too late.

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