What Rising Construction Costs Mean for Healthcare Real Estate in 2025

It’s no secret—construction costs have been climbing, and in healthcare real estate, that’s changing the way deals are done. From outpatient clinics to behavioral health centers and senior living communities, developers and investors are having to think differently.

Materials, labor, and compliance requirements are all pushing budgets higher than they were just a couple of years ago. And it’s not just about steel and concrete—specialized buildouts like imaging suites, surgical centers, and treatment rooms are driving up costs even more.

What does that mean for valuations? A few things:

• Replacement cost is higher, which often supports stronger values for existing assets.

• Operators are rethinking expansion, leaning more toward acquisition and retrofit than new construction.

• Speed-to-market matters—converted or repurposed buildings with healthcare capabilities are becoming more attractive.

In behavioral health especially, where demand is outpacing supply, rising construction costs can delay new facilities. That puts a premium on stabilized assets with the right licensing, location, and infrastructure already in place.

For anyone looking to build, buy, or repurpose healthcare real estate this year, understanding how construction costs impact valuation is crucial. It’s not just what something’s worth today—it’s what it would cost to replace it, and how fast you can bring it to market.

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