GRADUATING PROFESSIONALS DRIVING STRONG MANHATTAN EMPLOYMENT
The reasoning? Matt Coursen, U.S. healthcare lead for the leasing advisory services platform at JLL, attributes the optimism to both graduations and population growth, particularly among older Americans.
"Manhattan and the tri-state area is rich with academic medical centers," Coursen said, who is knowledgeable of the NYC borough and the tri-state area.
Also, he added that Manhattan has been experiencing one of the fastest population booms in the country, with "more people growing into the 65 to 85 year old range than there are being born every year."
"We're seeing a need for more and more healthcare services to support that growing population and the labor pool is growing as well, as is indicative of a healthy partnership there between the providers and the patients," Coursen noted.
Another important trend Coursen found in the second quarter was that asking rents and leasing were trending upwards in the borough.
NIH CUTS COULD HIT NEW YORK HARD
But still, headwinds and uncertainties remain for healthcare. For one, the NIH cuts are expected to hit New York State hard -- with Savills previously estimating that the region is expected to lose roughly $880 million in funding.
Coursen admitted that it's now hard to predict the exact impact the cuts will have -- but the effects could be "tremendous."
"In Q3, I expect we'll be able to start making some projections around the impact felt by the healthcare industry on the reduction in NIH funding, but we do expect it to be very impactful, because it goes directly to the research institutes and to the academic medical centers, which you know the tri state has a lot of," he cautioned.
"If these organizations are not receiving the same amount of funding, then the research programs can't proceed as they have been, and then it may trickle down to impact real estate and facilities and the way they operate within those assets."
MEDICAID CUTS BRING ANOTHER HURDLE
The other challenge healthcare will have to overcome is the medicaid cuts signed into law recently in the One Big Beautiful Bill Act. A June analysis from the Fiscal Policy Institute found that 70 hospitals in New York State are at risk of shuttering due to the gutting of the healthcare program.
"Those organizations that have value-based care models and community clinics that rely heavily on Medicaid reimbursements are going to feel the impact," Coursen explained.
He further added that it could lead to more healthcare real estate that's under-performing to get offloaded, swap out services or renegotiate leases.
Plus, NIH and Medicaid cuts will lead to a drop in patient volumes, less funding for research and advancement and potentially less sector development activity.
Right now, the healthcare sector is digesting the full impact that the OBBBA will have. Coursen is looking at a few things, including the reimbursement rates impact, how healthcare operators will be able to unlock capital and if industry players will invest and expand more in higher margin facilities.
As the healthcare operators analyze everything, Coursen predicts that transaction velocity will enter a slowdown period for the rest of 2025, with new project plans getting put on hold in Manhattan. He does, however, think that merger and acquisition activity will pick up.
"I think we're going to see a little bit more of that," adding that he believes this will occur with some field systems and other properties facing trouble as a result of the funding cuts.