July 2025
As the global economy continues to shift, finding reliable investments can be challenging. With ongoing changes and global events impacting markets, investors are approaching opportunities with increased caution and awareness.
For the discerning investor, medical property funds can present a logical investment avenue, underpinned by the ongoing demand for healthcare driven by demographic trends and essential service needs.
When considering the inherent demand and long-term leases associated with medical real estate, the asset class can present as an attractive option for the savvy investor. Regardless of your level of investment experience, making informed decisions when investing is crucial if your goal is to build a diversified and resilient portfolio that can stand the test of time.
The inherent demand: health is not a luxury, it’s a necessity
Healthcare is a non-negotiable, unlike many other areas of consumer spending. Sickness doesn’t take a holiday. Accidents don’t pause. The need for medical attention, from routine check-ups to life-saving surgeries, is constant and universal. The data tells us this story. According to the Australian Institute of Health and Welfare (AIHW), Healthcare spending grew approximately 5.5 per cent Compound Annual Growth Rate (CAGR) from 2012-2022 (does not account for inflation), which is notably higher than the 2.4 per cent GDP. It’s this essential and enduring demand that forms the foundation of medical property investment.
Demographic tailwinds: a silver tsunami and increasing life expectancy
Australia’s aging population is a powerful tailwind for medical real estate. The aging population, often referred to as the “silver tsunami,” is not a future projection; it’s a present reality. According to AIHW, 17.2 per cent of Australia’s population is now over the age of 65, increasing from 12.4 per cent in the early 2000’s and outpacing broader population growth. Combined with rising life expectancy rates, with the average Australian living until 83.2 years of age, the fourth longest in the world, it is expected that demographics will increase demand. As Baby Boomers enter their golden years, their healthcare needs naturally change and increase. A rise in demand for healthcare could translate directly into increased need for:
- Outpatient facilities: Urgent care centres, specialised clinics (cardiology, orthopedics, oncology) and diagnostic imaging centres
- Medical office buildings: Mixed-use buildings with general practitioners and pathology centres
- Surgical centres: For elective and necessary procedures that are increasingly moving out of traditional hospitals
High-quality tenants and long-term leases: predictable income streams
One of the key features of medical real estate for investors is the nature of its tenancy. Healthcare providers invest heavily in fit outs and specialised equipment. Relocating is a significant undertaking, disruptive to patient care, and incredibly expensive. This creates “sticky” tenants.
Furthermore, medical leases are typically long-term and can often range from 10 to 15 years, with built-in rent escalators. This provides a level of income predictability, with medical properties tending to maintain high occupancy rates and consistent rental income.
Government and insurance backing: a stable payer environment
As an industry, healthcare benefits from significant government and private insurance backing. Medicare and private health insurance plans provide a robust and generally stable payer environment for healthcare services.
According to the Australian Prudential Regulation Authority (APRA), there is currently, 12.2 million Australians covered by private health, which represents 45 per cent of the population.
While policy changes do occur, a commitment to healthcare access remains a bipartisan priority in Australia. This provides healthcare providers with a reliable revenue stream, which in turn supports their ability to maintain operations.
Specialised assets, less competition: a niche with high barriers to entry
Medical real estate is not a generic asset class. It requires specialised knowledge in design, construction, and regulatory compliance. Given the specialised nature of medical real estate, well-located and appropriately zoned assets are both scarce and expensive.
Building a compliant medical office building is a complex undertaking, requiring specific permits, accessibility considerations, and infrastructure for advanced medical equipment. This specialisation creates higher barriers to entry for new developers and investors, as well as increased costs.
Investing in medical through an unlisted property fund
Investing in a medical property fund can offer a diversified and professionally managed approach for capitalising on these powerful trends. Instead of acquiring properties as an individual investor, which can be capital-intensive and require specialised expertise, a fund can allow you to:
- Diversify your risk: across multiple properties, tenants and locations
- Access institutional-grade assets: often beyond the reach of individual investors
- Benefit from expert management: work with a dedicated team with deep knowledge of the healthcare real estate market which can professionally manage the assets within the fund
- Increase opportunities for passive income: potentially through regular distributions from rental income.
Investing in medical real estate goes beyond physical assets – it’s an approach that’s supported by long-term demand for healthcare services.
For investors looking to align with demographic trends and access properties typically leased to long-term tenants, a medical property fund may offer a considered avenue for portfolio diversification.
The Westbridge Medical Property Fund is now open for investment. For more information click here.
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