As we head into 2025, we remain optimistic about the U.S. healthcare REIT industry as it is well-poised for robust growth thanks to the aging population, rising healthcare expenditure and technological advancements.

This draws our attention to healthcare REITs that cater to different asset categories, like CareTrust REIT, Inc. CTRE and American Healthcare REIT, Inc. AHR. Prior to delving into the fundamentals of these stocks, it is important to first understand the factors influencing the future outlook of the healthcare REIT industry.

Why Buy Healthcare REITs Before Moving Into 2025?

Demand for healthcare services in the United States is primarily influenced by the aging American population. In the years ahead, with the senior citizens’ population expected to rise, the national healthcare expenditure by senior citizens, who constitute a major customer base of healthcare services and incur higher healthcare expenditures than the average population, will likely increase. Per a CBRE report, senior citizens aged more than 65 in the U.S. population are expected to rise 20% (70 million) by 2030 from 17% (61 million) in 2024. During this period, it is anticipated that senior citizens will increase total outpatient healthcare spending by 31%, bringing it to approximately $2 trillion. Hence, with an expectation of a rising senior citizens’ population and growing healthcare spending, healthcare REITs are well-prepared for a compelling multi-year growth opportunity.

The healthcare sector is relatively immune to macroeconomic uncertainty compared with office, retail and apartment companies, as consumers still need to spend on healthcare services while curtailing discretionary purchases. This aspect of the industry provides stability to the healthcare companies during tough economic conditions and shields them from market volatility. This stability translates into reliable rental income for healthcare REITs, providing investors with regular dividend payouts. Moreover, according to the CBRE report, estimates indicate that inflation-adjusted consumer spending on healthcare goods and services will grow by 2.5% in 2025, surpassing the 1.9% growth rate for consumer spending on all goods and services for the fourth consecutive year.

Moreover, advancements in technology are playing a crucial role in shaping the future of healthcare real estate. The integration of telehealth services, the adoption of electronic health records, and the deployment of advanced diagnostic equipment require modern and adequately equipped facilities. Healthcare REITs prioritizing investments in properties with advanced technology infrastructure are anticipated to witness a rise in demand and improved occupancy rates.

The rising demand for outpatient services, specialty medical practices, and home care services is a significant factor contributing to the growth of healthcare employment, which is anticipated to surpass the total job growth in the United States in the coming years. Although the U.S. economy faced a slowdown in the middle of 2024, consensus forecasts suggest that a recession is probably avoided, given that employment continues to increase, though at a slower rate.

A robust pipeline of new product offerings has slowed the decrease in vacancy rate, while tenants’ preference toward higher-quality spaces has contributed to rent increases at best properties. Per the CBRE report, over the next two years, rent growth is anticipated to range from 1.4% to 1.8%, while the vacancy rate is likely to decline below 9.5%.

2 Healthcare REITs to Buy Now

American Healthcare REIT, Inc.: Headquartered in Irvine, CA, this REIT is engaged in the acquisition, ownership and operation of a diversified portfolio of clinical healthcare real estate properties, with a focus on senior housing, skilled nursing facilities, outpatient medical buildings and other healthcare-related properties. Its portfolio spans the United States, the United Kingdom and the Isle of Man.

American Healthcare REIT is expanding through strategic acquisitions, including gaining full ownership of Trilogy Holdings. With a strengthened financial position and robust portfolio, the company is well-positioned for future growth in the healthcare real estate sector.

AHR currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Over the past two months, the Zacks Consensus Estimate for the 2024 and 2025 FFO per share has witnessed upward revisions to $1.42 and $1.71, suggesting a 1.4% and 20.1% increase year over year, respectively.

CareTrust REIT, Inc.: Headquartered in San Clemente, CA, this REIT is engaged in the acquisition, ownership, financing, development and leasing of seniors housing and other healthcare-related properties. It also owns and leases properties to independent operators, skilled nursing facilities, assisted living facilities and independent living facilities, along with multi-service campuses.

The company is committed to investing and/or developing more healthcare and senior housing properties whenever appropriate opportunities emerge. It has a steady pipeline of investments as it leverages its relationships to find attractive opportunities. With solid dividend payouts and strategic investments, CTRE is well-positioned for sustainable growth and value creation for shareholders.

CTRE currently carries a Zacks Rank #2 (Buy). Over the past two months, the Zacks Consensus Estimate for the current year and 2025 FFO per share has witnessed upward revisions to $1.50 and $1.75, indicating for a 6.4% and 16.5% increase year over year, respectively.

Here’s how both the stocks have appreciated in the past six months.

Image Source: Zacks Investment Research

Conclusion

Investors seeking to diversify their investment portfolios and tap into the resilient healthcare sector may find healthcare REITs to be a compelling choice. By gaining insights into the factors influencing the healthcare real estate market and remaining updated on industry developments, investors can make strategic decisions and take advantage of the opportunities that healthcare REITs offer.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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