Weekly Health Care Real Estate Briefing: Congress Passes Inflation Reduction Act I CPI Increases 8.5% I Hospital Margins I Construction Costs

1. Congress passed the Inflation Reduction Act, which 1) includes $300B for energy and climate reform and $60B in incentives for renewable energy products such as solar panels and wind turbines; 2) gives the federal health care secretary the right to negotiate drug prices for Medicare and caps out of pocket expenses on certain drugs for Medicare beneficiaries; 3) and adds a 15% tax on corporations receiving $1B or more in income and a 1% tax on stock buybacks per NPR.
2. As of July, the Consumer Price Index (“CPI”) has risen 8.5% over the previous 12-month period. However, the CPI has leveled off after 25 months of continuous increases, remaining flat from June to July per the WSJ.
3. Hall Render recently published articles on buying ASC real estate, absolute net leases and streamlining your lease negotiation process.
4. NAREIT published its mid-year outlook. Self-storage, industrial and timber REITs were top performers while health care REITs were near the bottom in terms of performance. Concerns about a slowing economy, inflation and rising interest rates impacted REIT performance.
5. Kaufman Hall published its mid-year hospital flash report. Operating margins are at .09% through June, down 49% over the previous 12-month period. Operating expenses are up 9.5% YTD due to inflation and labor shortages. Margins appear to be improving and labor costs are cooling off.
6. Are MOBs the real estate superstar of the future? MOB borrowers rarely default on loans. The number of MOB loans in default typically hovers around .5%, a number that peaked at 2% in 2020. During the same period, around 20% of hotel loans were in default. MOB construction represents 20% of all office construction per CCIM and Moody’s.
7. Construction costs increased 3.3% nationally during Q2 of 2022. Denver saw a 2.2% increase while Phoenix and Chicago saw 2.6% and 4% increases, respectively. Workforce challenges, increases in material shipping costs and material shortages are expected to linger for the remainder of 2022 per Mortenson.
8. Plans for a new $1B VA hospital in St. Louis were announced by federal officials. The project will include a 9-story hospital tower with 700K sf per St. Louis Business Journal.
9. The Las Vegas City Council may redevelop a 50-acre convention center and stadium into a $1B mixed-use medical campus. The site was earmarked for Amazon at one point per Las Vegas Review Journal.
10. BayCare is seeking zoning approval for its 17th hospital in Florida, which will be located in Manatee County.

Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.