Hospital projects, health spending lift demand for B. C. medical office space
Medical office is a distinct asset class in B. C. commercial real estate that is riding the wave of higher health-care spending, aging baby boomers and major hospital projects, though concerns remain around new project viability.
'Ripe for opportunity'Photo: Rob Kruyt, BIV. Medical office usage is a very small but still important segment of the Metro Vancouver office market, said Andrew Petrozzi, director and head of Canada research with Newmark Group Inc. Medical office is a distinct asset class in B. C. commercial real estate that is riding the wave of higher health-care spending, aging baby boomers and major hospital projects, though concerns remain around new project viability. Total health-care spending in Canada was expected to reach $399 billion in 2025, or $9,626 per Canadian, rising to 12. 7 per cent of GDP, according to the Canadian Institute for Health Information (CIHI). In B. C. , health spending has risen to 9. 4 per cent of GDP from 6. 8 per cent 20 years ago, driven by inflation, population growth, population aging and service utilization, CIHI said. This is flowing through to medical real estate such as massive hospital projects and the clinics and pharmacies that want to be near them. “It’s … not as impacted by general economic conditions unlike traditional office. You’re getting medical users, there’s provincial and government funding to grow that sector, so in theory that should help grow that type of real estate,” said Robin Buntain, a Vancouver-based principal with Avison Young. “I wouldn’t say it’s a boom cycle, but definitely relative to everything else … I think it’s quite opportunistic. ”Major hospital projects include the multi-phase redevelopment of Burnaby Hospital, whose new health-care pavilion and expanded support facilities building opened to patients in March 2026 at a cost of $633 million, according to the province. There is also the $2. 18 billion new St. Paul’s Hospital coming in 2027 to False Creek Flats, as well as the multi-phase redevelopment of Royal Columbian Hospital in New Westminster. Tenants and strata owners may want to set up shop around these health-care hubs, said Buntain. “There’s going to be a lot of specialty tech uses that might find the value in being adjacent or in close proximity to these new hospitals,” he said. “There’s going to be a lot of new technology and it’s ripe for opportunity for medical office users and investors in those areas. ”At the same time, a decentralization of health care may be occurring, pushing medical offices away from large hospitals. Hospitals are right-sizing, there is a bigger emphasis on outpatient services and care is being delivered in communities, said Shary Adams, health-care leader and senior associate with Gensler, a global architecture, design and planning firm whose clients have included Cleveland Clinic and Telus Health. “We’re integrating care more with communities and … moving toward preventative, not just acute care. I call it ‘pre-vivorship,’ not just survivorship,” she said. Design demandsOn a practical level, medical offices and clinics have various unique requirements, said Pardeep Punia, a part-owner of Pulse Medical Construction & Design, a B. C. company working on dental, medical and pharmacy buildouts in Vancouver and Langley. There are special needs around air and water, hygiene, cleanability and antibacterial surfaces like stainless steel, he said. Offices may also need mechanisms to prevent hairs and fluids from going into the public sanitary sewer system and enable them to be discarded safely. There is a trend in the last three to four years where doctors or pharmacists are joining forces and creating medical-pharmacy tenant improvement spaces where they feed work to each other, he said. Punia said his industry—he knows of at least six or seven similar businesses in the Lower Mainland and Fraser Valley—is driven by doctors and pharmacists turning into entrepreneurs at the professional level. “People are branching out and starting their own businesses. I think that’s why we’re having an uptick in medical and pharmacy buildouts,” he said. Medical professionals are increasingly buying strata-titled spaces rather than leasing them, said Andrew Petrozzi, director and head of Canada research with Newmark Group Inc. This helps doctors and dentists control the costs of their business, avoid being subject to rising leases and avoid having to move. Moving is problematic because there is the potential that they may lose some of their clients who travel to see them, he said. Banks love health professionals like doctors, dentists and veterinarians and commonly offer them 100-per-cent financing, said Raman Bayanzadeh, a Realtor with Royal LePage Commercial. | Chung Chow, BIVRaman Bayanzadeh, a Realtor with Royal LePage Commercial, said lenders offer attractive financing packages to dentists, family doctors and veterinary clinics that go up to 100 per cent of the value of the property and any improvements. “The banks love them,” he said. “In a down market right now, if there’s anyone that has access to good money, it’s health care. ”Because medical spaces require expensive fittings, landlords can secure long-term leases of 10-20 years with stable, low-risk, recession-proof tenants, Bayanzadeh said. Meanwhile, “medtail”—medical retail—is being filled in by tenants relocating from higher-floor offices to the ground floor for greater accessibility and visibility. B. C. ’s aging population and their pricey health-care needs create “ongoing, permanent demand” for medical real estate, Bayanzadeh said. “I don’t think in B. C. or in Canada we have the facilities and space and the doctors to service that, so it's a growth potential and a reality,” he said. Choppy watersIt’s not all smooth sailing for medical office developers. The financials are tough on building something new and trying to fill it due to high construction costs, macroeconomic conditions and uncertainty, said Avison Young’s Buntain. Indeed, many medical offices are located in older Class B buildings in traditional nodes such as the area around Vancouver General Hospital and the existing St. Paul’s Hospital, said Newmark’s Petrozzi. But there is a health component to new, ongoing or recent projects such as Lark Group’s City Centre developments in Surrey and QuadReal Property Group LP’s Archetype in False Creek Flats. The ongoing redevelopment of Oakridge Park in Vancouver also includes medical strata office, he said. Compliance and complexity must be navigated. Gensler’s Adams said medical real estate must tackle strict regulatory requirements, infection control, technical standards, specialized equipment, life safety and privacy rules. Standards and guidelines come from Health Canada, the provincial health authorities and CSA Group (formerly the Canadian Standards Association). These touch on things like HVAC requirements, the number of air changes per hour, accessibility, corridor widths, ceiling heights, people flows and telemedicine. Design is focused on lived experience, with in-house surveys of patients and staff ranging from clinicians to custodians, Adams said. The sector has strong fundamentals, she said. These include the shortage of family physicians, the growing emphasis on mental health and wellness, the need for community-based care and the aging baby boomers. These factors could provide momentum to medical office space in Vancouver and beyond. “Health care is a bit of a unique animal,” Adams said.