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Multi-Family & Medical CRE: 30 Years Later

Market Trends & Analysis Management & Ownership


In the early ‘90s, home ownership was still the “American Dream," and the percentage of people owning homes was in the mid-60 percentile. The industry had just taken a hit with the Savings & Loan debacle of the ‘80s and ‘90s, but a robust economy and desire to own prevailed, and the national housing stock increased dependably every year with local and national-brand homebuilders. Apartments were a choice only when affordability was a factor. Condominiums flourished also, where apartments could in fact be owned.

Despite the usual fluctuations that occurred when the economy soured, home ownership continued to rise, and lenders often lent 100%—or even more—to provide mortgages for the ever-rising home values, with a national push to increase home ownership to 70%. To lenders, the risk was low as their mortgages were mostly bundled into financial securities, often recklessly. The rating agencies looked the other way when securities—including subprime mortgages—were created. In 2007-2008, a crash occurred that lasted almost three years, flushing out the home buyers who probably weren’t really capable of maintaining their mortgage.  A boom then began in multi-family units that hasn’t stopped since, fueled also by the billions of dollars in college tuition debt incurred by a whole generation of erstwhile homeowners now relegated—by financial constriction—to the rental market. In almost all communities nationwide, apartments appeared, while many condominium developments—unable to be sold individually as units—converted to apartments as well. The local communities stifled apartment development because of the burden on the school systems, with not enough property tax generated per student. Those communities relaxed somewhat when the per-unit children ratios went down, and in a full-employment economy, apartments were needed for local labor force increases.

The effect on real estate? Values of modern multi-family units have skyrocketed, and older, smaller complexes have appreciated nicely as well. There is a trend to create new walkable communities, many of which contain far more rentals than any time in the past. And in today’s full-employment economy, living units near metro areas mean more people to hire.


The Coronavirus/COVID-19 impact is certainly having a last-minute major impact on medical real estate dynamics, which as of this writing are impossible to predict. But, as this is a discussion of the changes occurring over the past 30 years, the assumption is that things—at some point—will return to normal.

The United States—unlike the UK, Germany, Czechoslovakia, France and Japan—has had population growth sufficient to sustain the drift toward an aging population. Natural growth — without immigration—has approached 2.1 children per family of two parents in order to even stay at current levels, the rest coming from immigration. Politically, immigration as an issue has had an up-and-down effect on the country’s population. But with people living longer, and medical advances adding many new life-sustaining techniques, medical facilities—hospitals, urgent care centers, and medical office buildings—have grown in number far more rapidly than the general population. For countries with shrinking or even stagnant population growth, the era of diminished medical care may be coming, as there aren’t enough healthy and young people to pay for it at today’s growth rates. Though the trend appears to have nothing changing its inflection, it appears economically unsustainable in the long run. In 2020, billions of dollars have already been invested in major new hospitals around the country, mostly in locations away from their historical centers, gravitating to the suburbs where the aging population resides. New smaller hospitals with fewer beds—and even some that are almost exclusively outpatient—have become a new asset class. Medical office buildings, on the rise for most of the new millennium, are now plateauing due to the downward pressure on physician income levels. Those doctors who continue to prosper are orthopedic surgeons, heart and vascular specialists, cancer practitioners, and dermatologists and plastic surgeons. Those struggling include pediatricians, family practice physicians, anesthesiologists, and others.

The values of the real estate for hospitals appear to be rising, especially for the newer, more nimble models, but medical office buildings attached to them are a little more uncertain, and remote medical office facilities may not keep pace over the long run, especially those owned by groups of doctors. More expensive to build than conventional office space, they may find themselves someday unable to compete with lower rental rates.

As the world handles and recovers from the latest COVID-19 pandemic, the world of medical real estate—and the entirety of the commercial real estate industry—is sure to shift. What that shift looks like remains unknown, but as the last 30 years have shown, ours is an industry of perseverance and flexibility.

Dave Noonan, SIOR, CCIM, LEED AP

Dave Noonan, SIOR, CCIM, LEED AP

Industrial Specialist
Broker, Lakota Commercial Realty
West Chester, OH
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