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Are Healthcare Fundamentals Going to Remain Stable?

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According to a recent REIT report about health care fundamentals put out by REIT research firm, BTIG, healthcare results remained stable in Q1 2018. The report said that recent fundamental trends impacting the sector remained intact.

While not mentioning specific REITs, the firm said that while medical office owners are likely to continue struggling to source acquisitions given their cost of equity, fundamentally, BTIG views the assets as the healthiest in the group.

Conversely, the firm says, senior housing continues to work through its supply issues. The report says the skilled nursing deals with mix shift and regulatory changes will be affected.

Overall, the report says, BTIG expects a generally challenging environment for most of its coverage through 2019.

And according to a recent report from Seeking Alpha, “healthcare REITs have been the weakest performing real estate sector over the past year. Weakening fundamentals and rising interest rates have knocked 25% of value off this historically steady sector. In an effort to contain runaway costs, the ACA has taken aim at the higher-cost providers, including skilled nursing and hospital operators. Acute care REITs are struggling amid deteriorating fundamentals.”

Meanwhile, their article says that private-pay healthcare REITs are facing a different set of challenges. “While longer-term demographics remain highly favorable, supply growth continues to outpace demand for senior housing facilities.”