Healthcare Realty Trust Incorporated (HR): PESTLE Analysis [Nov-2025 Updated]

You're trying to gauge the true value of Healthcare Realty Trust Incorporated (HR) in a market where massive demographic tailwinds are fighting immediate financial headwinds. Honestly, the long-term bet on the aging US population and the shift to lower-cost outpatient care is solid-US national healthcare expenditure is projected to exceed $5.5 trillion in 2025, keeping Medical Office Building occupancy often above 90% sector-wide. But the near-term reality is that high interest rates are making debt management defintely tough, and evolving regulations are adding complexity. So, where do the political, economic, and technological pressures intersect to create a clear action plan for your investment?

Healthcare Realty Trust Incorporated (HR) - PESTLE Analysis: Political factors

Medicare and Medicaid reimbursement rate stability is critical

You're looking at Healthcare Realty Trust Incorporated's (HR) tenant base, which is heavily reliant on government payers like Medicare and Medicaid, so stability in reimbursement rates is defintely a core risk. The political environment in 2025 has introduced significant volatility through the recently enacted federal legislation.

The 'One Big Beautiful Bill Act' (OBBBA), signed in July 2025, is the biggest near-term factor. This law is projected to reduce federal spending on healthcare by over $1 trillion across a ten-year period. While the most drastic Medicaid cuts were avoided through a compromise in the tax package, the law still implements policy modifications like work requirements and funding caps for Medicaid, which will pressure health systems and hospitals-the primary tenants for Healthcare Realty Trust.

Another major headwind is the expiration of enhanced Affordable Care Act (ACA) subsidies at the close of 2025. The Urban Institute estimates that this expiration will increase uncompensated care nationwide by $7.7 billion, with roughly $2.2 billion of that falling directly on hospitals. This rise in bad debt for your tenants, especially safety-net hospitals, directly impacts their financial health and their ability to sustain rent payments on the Medical Office Buildings (MOBs) they lease from Healthcare Realty Trust.

Increased scrutiny on hospital system consolidation affects tenant stability

The merger and acquisition (M&A) landscape for hospital systems, which are key anchors for Healthcare Realty Trust's properties, is a double-edged sword. On one hand, consolidation can create larger, more financially stable tenants. On the other, the political scrutiny is intense, which can halt deals and create uncertainty.

The U.S. Department of Health and Human Services (HHS) released a report in January 2025 that raised significant concerns over consolidation, citing studies that show hospitals that acquired others raised prices by an average of 12.9% six years later. This kind of data fuels political pressure to block deals.

Still, the M&A activity is slowing down anyway. The first quarter of 2025 saw only five hospital M&A transactions, a sharp drop compared to 20 in Q1 2024, partly due to policy uncertainty. This slump, however, is offset by the fact that ongoing financial distress-driven by rising costs-may force more consolidation as a survival tactic. For Healthcare Realty Trust, this consolidation is a major driver of their business model; health system leasing comprised approximately 48% of their signed lease volume in the third quarter of 2025. Less M&A means fewer new, large-scale leasing opportunities.

Federal budget negotiations create uncertainty for healthcare spending

The sheer scale of government healthcare spending, with Medicare and Medicaid accounting for approximately 22% of the 2024 federal budget, means that budget negotiations will always be a source of political risk. The recent government shutdown in November 2025, resolved by a short-term continuing resolution through January 30, 2026, is a perfect example of this near-term instability.

The core uncertainty now revolves around the large-scale spending cuts mandated by the OBBBA and the potential for a 4% Medicare spending sequester (automatic cut) in early 2026 if Congress fails to address the deficit impact. This is a clear, quantifiable risk.

• Anticipate a 4% Medicare spending sequester in early 2026 if Congress does not act.
• Monitor the extension of ACA subsidies; their expiration would cost taxpayers an estimated $350 billion over 10 years to renew.
• Prepare for continued political rhetoric around Medicaid block grants, which would cap federal contributions and shift financial risk to states and, ultimately, providers.

What this estimate hides is the potential for a political trade-off: a cut in one area (like the sequester) could be offset by a regulatory rollback in another, but the net effect is a high-stakes guessing game for hospital CFOs.

State-level Certificate of Need (CON) laws impact new facility development

Certificate of Need (CON) laws require state approval for new facility development or major capital expenditures, directly affecting the pace and cost of new Medical Office Building (MOB) construction-a key growth driver for any healthcare REIT. The political trend, however, is toward deregulation, which is a positive for development.

For instance, New York State adopted major amendments to its CON regulations on August 6, 2025, significantly streamlining the process. This is a clear, actionable opportunity.

• The threshold for a full CON review for non-hospital facilities (where most MOBs fall) was raised from $6 million to $20 million in New York.
• Projects with capital costs up to $30 million can now use an architectural self-certification process, bypassing the lengthy state Department of Health (DOH) review.

This political shift at the state level directly reduces the time and administrative cost associated with new development and significant tenant improvements, which should boost Healthcare Realty Trust Incorporated's ability to execute on its development pipeline and meet tenant demand for modern, ambulatory care space. The quick math here is that a faster approval process means quicker rent commencement and higher returns on capital deployed.

Healthcare Realty Trust Incorporated (HR) - PESTLE Analysis: Economic factors

High interest rates increase the cost of capital for acquisitions and debt refinancing.

You're watching your cost of capital (WACC) closely, and for good reason. The era of near-zero interest rates is defintely over, and while the Federal Reserve is expected to signal a cautious approach, the high-for-longer environment is a real headwind for Healthcare Realty Trust and the entire REIT sector.

For HR, this translates directly to higher financing costs for new Medical Office Building (MOB) acquisitions and refinancing existing debt. The average Medical Office Building (MOB) capitalization rate (cap rate)-which is a key valuation metric-averaged 6.9% in early 2025, a significant jump from the 2022 lows.

Here's the quick math: HR's leverage is elevated, with net debt to EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) at approximately 6.4x as of mid-2025. The company's strategy for 2025 is focused on stabilization, not aggressive growth, with a clear action plan to reduce this. They are planning asset sales of $400 million to $500 million to bring the leverage ratio down to a target of 6.0x to 6.25x.

The good news is that the prospect of lower rates-with projections suggesting a potential 50 basis points (bps) of rate reductions in 2025-should support further investment activity and stabilize cap rates.

Inflationary pressure on operating expenses (utilities, labor) for tenants.

The inflationary pressure on your tenants is your problem, too, because it squeezes their operating margins, which can eventually impact rent growth and retention. Healthcare providers are dealing with input costs that have outpaced reimbursement rate increases for several years.

The commercial medical cost trend is projected to grow at its highest rate in 13 years. For 2025, PwC's Health Research Institute forecasts an 8% year-over-year medical cost trend for the Group market. This is a massive jump that directly affects the hospitals and physician groups leasing HR's properties. The Centers for Medicare & Medicaid Services (CMS) also projects annual cost increases per enrollee of 5.0% in 2025.

Labor is the biggest driver. Healthcare employment growth was still strong at 2.8% as of August 2025, well above the total nonfarm growth of 0.9%, meaning wage pressure continues.

The impact on tenants is clear:

• Labor Costs: Wage inflation for nurses and technicians remains high due to sustained demand.
• Supply Costs: Hospitals and clinics are seeing higher costs for medical supplies and general infrastructure.
• Reimbursement Lag: Payer contract renewals often lag inflation, forcing providers to absorb the difference.

Strong demand for MOBs keeps occupancy rates high, often above 90% sector-wide.

Despite the macro-level economic jitters, the core demand for Medical Office Buildings remains inelastic and robust. That's the defensive moat of this sector. The aging US population-specifically the Baby Boomer generation-continues to drive a structural shift toward outpatient services.

This strong demand has kept sector fundamentals exceptionally tight. The national MOB occupancy rate reached a cyclical high of 92.7% in the top 100 metro areas in the second quarter of 2025. This high occupancy rate is the direct result of demand outpacing new supply, which is limited due to high construction and borrowing costs.

For Healthcare Realty Trust specifically, this trend is visible in their portfolio metrics. In Q2 2025, HR reported a sequential increase in same-store occupancy to 90%, with a strong tenant retention rate of 83%. This is a powerful counter-cyclical force against rising capital costs.

US national healthcare expenditure is projected to exceed $5.5 trillion in 2025.

The sheer scale of the US healthcare economy provides a massive, stable foundation for the MOB sector. National Health Expenditure (NHE) is projected to reach an estimated $5.6 trillion in 2025, according to federal actuaries. This is a 7.1% increase over 2024, reflecting continued strong growth in the use of health care services.

This spending growth is expected to continue to outpace the growth in the U.S. Gross Domestic Product (GDP), which means healthcare is taking an ever-larger piece of the economic pie.

The largest share of this massive spending goes to hospitals, which are the anchor tenants for many of HR's properties. This is a critical point for understanding the stability of the revenue stream.

What this estimate hides is the ongoing shift of care from inpatient to outpatient settings, which is exactly where HR's MOB portfolio sits. The growth in physician and clinic spending, while not detailed for 2025 in the search result, is a long-term tailwind for the value of these outpatient facilities.

Healthcare Realty Trust Incorporated (HR) - PESTLE Analysis: Social factors

Aging US population drives demand for outpatient and specialty care services.

The most significant social factor driving demand for Healthcare Realty Trust Incorporated's (HR) Medical Office Building (MOB) portfolio is the rapid aging of the U.S. population. This is not a slow trend; it's a demographic wave hitting its peak right now. By 2025, approximately 73 million baby boomers will be age 65 or older, representing more than a fifth of the total U.S. population. This massive cohort requires significantly more medical attention and services than younger age groups. Here's the quick math: seniors currently account for 37% of all healthcare spending, even though they make up only about 17% of the population. This disparity in spending is precisely why demand for specialty care-which often happens in an MOB-is inelastic and growing.

The population aged 65 and older grew by 3.1% from 2023 to 2024, which is more than double the 1.4% growth rate seen in the working-age adult population. This growth guarantees sustained, long-term demand for the real estate that houses chronic disease management, diagnostics, and preventative care. This demographic shift is defintely a core tailwind for the entire healthcare real estate sector.

Shift from inpatient to lower-cost outpatient settings increases MOB utilization.

The economic and clinical logic of moving care out of expensive hospitals and into lower-cost outpatient settings (ambulatory care) is undeniable, and it's accelerating in 2025. Outpatient care is forecast to have the highest growth rate across all service lines, with patient volumes projected to increase by 18% over the next decade. Specifically for the properties Healthcare Realty owns, outpatient surgery volumes are expected to rise by 20% over the same period. This shift directly translates into higher demand for MOB space.

The market is tight, too. National MOB occupancy across the top 100 U.S. markets hit 92.7% in the second quarter of 2025, a cyclical high. Healthcare Realty is capitalizing on this, reporting a same-store occupancy of 90.0% in Q2 2025, a sequential increase of 40 basis points from the prior quarter.

Here is a summary of the site-of-care shift projections:

• Outpatient Volumes: Expected to grow 10.6% over the next five years.
• Outpatient Surgery Volumes: Projected to rise 20% over the next decade.
• Inpatient Care Volumes: Expected to see a more modest 5% growth over the next decade.

Health equity and access initiatives push for more neighborhood-level clinics.

The focus on health equity and improving access, especially in underserved communities, is driving a physical decentralization of healthcare infrastructure. This means moving away from the traditional, massive hospital campus toward smaller, neighborhood-level clinics. Health systems are actively pursuing this strategy to meet consumers where they live, work, and shop. This is pushing new development to off-campus sites; currently, 65% of new MOB developments are located off-campus, explicitly reflecting a focus on patient convenience.

The mindset is shifting from reactive sick care to proactive prevention. A significant 65% of consumers state they want a healthcare system built around prevention, not just treatment. This focus on preventative and primary care requires accessible, community-based facilities, which is the core asset class for Healthcare Realty. The company's strategy of owning properties affiliated with leading health systems is key here, as health systems are the ones leading the charge in expanding their real estate footprint into these new, convenient locations. Health system leasing made up approximately 33% of Healthcare Realty's signed lease volume in the second quarter of 2025.

Consumer preference for convenience favors facilities near residential areas.

Patients are acting more like consumers, prioritizing convenience, cost, and access over traditional loyalty. Location is a key factor in choosing a provider. While the physician's office was the default for 72% of care in the past year, only 34% of consumers say they would ideally choose it going forward. Consumers are actively pulling care toward virtual visits, at-home services, and retail clinics that offer less friction.

This preference for convenience is fueling the growth of urgent care centers, a common MOB tenant. The use of urgent care among survey participants increased by 240 basis points (to 27%) between 2023 and 2025. This trend underpins the value of Healthcare Realty's portfolio, which is strategically located to serve these decentralized, high-demand, high-convenience care models.

Healthcare Realty Trust Incorporated (HR) - PESTLE Analysis: Technological factors

The technology landscape for Medical Outpatient Buildings (MOBs) is no longer a simple discussion about internet speed; it's about deep physical and digital infrastructure that directly impacts tenant demand and operational costs. For Healthcare Realty Trust Incorporated, this means the $38 million square feet portfolio, comprising approximately 650 properties as of 2025, must be viewed as a platform, not just a collection of buildings. Your core challenge is balancing the capital expenditure (CapEx) needed for these upgrades with the promise of higher cash net operating income (NOI) growth.

Expansion of telehealth reduces the need for some routine in-person visits.

Telehealth is a permanent fixture now, not a pandemic anomaly. As of early 2025, virtual visits account for an estimated 23% of all healthcare encounters nationwide, and for specialties like mental health, that rate can exceed 50%. This shift is a double-edged sword for a medical office REIT like Healthcare Realty Trust Incorporated. On one hand, it reduces the need for large waiting rooms and excessive exam rooms, which could pressure some smaller tenants to downsize their space.

But here's the quick math: Telehealth has also delivered an estimated $42 billion in annual healthcare savings by reducing missed appointments and lowering emergency department utilization. This financial efficiency frees up capital for health systems to invest in high-acuity services that must be delivered in a physical MOB, like imaging and ambulatory surgery. So, while routine primary care visits may shrink, the demand for complex, high-margin clinical space should increase, which aligns with Healthcare Realty Trust Incorporated's strategy of focusing on health system-aligned properties.

Integration of advanced medical equipment requires specialized, modern building infrastructure.

The movement of complex procedures out of the hospital and into MOBs is the primary driver of physical infrastructure CapEx. When a tenant wants to install a high-field Magnetic Resonance Imaging (MRI) or Computed Tomography (CT) scanner, the building must support it. This isn't a small ask. A single MRI suite requires between 550 to 600 square feet of specialized, shielded space. More critically, it demands a dedicated, high-voltage power supply, typically 480V, 3-phase service, and a dedicated, non-ferrous Heating, Ventilation, and Air Conditioning (HVAC) system, often with closed-loop cooling to manage the magnet's heat.

Retrofitting for this level of technology is expensive, but it anchors the best tenants to your property for the long term. The US healthcare sector's annual capital expenditures on imaging infrastructure alone is a massive market, exceeding $3 billion. This investment is why your same-store cash NOI growth, which hit 5.1% in Q2 2025, is so important-it proves the value of having this modern, specialized infrastructure in place.

Smart building technology (HVAC, energy) is essential for operational efficiency.

Operational efficiency is a core pillar of the 'Healthcare Realty 2.0' strategy. Smart building technology is the key to delivering on that. By 2025, nearly 70% of healthcare systems are expected to adopt technology-driven designs in their facilities. This includes using Internet of Things (IoT) sensors and Artificial Intelligence (AI) to optimize energy consumption and predictive maintenance (PdM).

For a portfolio of Healthcare Realty Trust Incorporated's scale, even a small efficiency gain is defintely worth millions. For example, systems that integrate AI for real-time energy management have been shown to achieve up to a 20% reduction in overall operating costs for facilities. This directly supports the goal of improving NOI margins, which were 64.3% in Q2 2025. Smart systems turn a fixed cost (utility bills) into a variable, manageable one, which is crucial for maintaining a competitive edge in a high-occupancy market (Q2 2025 same-store occupancy was 90.0%).

Electronic Health Record (EHR) systems demand robust, secure data infrastructure in facilities.

The entire US healthcare system runs on Electronic Health Record (EHR) systems. With roughly 85% of office-based physicians using an EHR daily, the physical building must support a high-demand, hyper-secure data environment. This is less about physical space and more about fiber optic connectivity, redundant power, and cybersecurity.

The global EHR market is projected to reach $41 billion in 2025, demonstrating the scale of the digital infrastructure investment by your tenants. For Healthcare Realty Trust Incorporated, this means providing infrastructure that meets strict Health Insurance Portability and Accountability Act (HIPAA) compliance standards. The cost to implement a robust EHR system for a tenant can range from $32,000 to $70,000 per full-time employee, which means they need a landlord who can provide the rock-solid, high-speed backbone to justify that spend. Our focus must be on ensuring every MOB has the fiber capacity and emergency power to prevent data loss or system downtime, which is non-negotiable for clinical operations.

Here is a summary of the core technological demands and their financial implications:

The action item is clear: Finance needs to model the long-term return on investment (ROI) for a $100 million multi-year capital program focused solely on these four technological upgrades across the portfolio's core assets, comparing the cost to the potential uplift in cash leasing spreads (which were 3.3% in Q2 2025) and tenant retention (which was 83%).

Healthcare Realty Trust Incorporated (HR) - PESTLE Analysis: Legal factors

You, as an investor or strategist, need to see the legal landscape not just as a compliance checklist, but as a direct driver of operating cost and tenant stability. For Healthcare Realty Trust Incorporated, the legal environment in 2025 presents a dual challenge: managing the non-negotiable costs of federal regulation (HIPAA, ADA) and navigating the macro-policy shifts of the Affordable Care Act (ACA) that directly impact their tenants' financial health.

The core risk here is that compliance failures or adverse policy changes could erode the strong Same Store Cash Net Operating Income (NOI) growth, which reached +5.4% in the third quarter of 2025. Honestly, a stable tenant base is the best defense against legal volatility.

Strict adherence to HIPAA (Health Insurance Portability and Accountability Act) for tenant data security.

Healthcare Realty Trust Incorporated's tenants-the doctors, clinics, and health systems-are the primary custodians of Protected Health Information (PHI), but the physical security of that data begins in the building itself. This means the company is a business associate (BA) in a practical sense, responsible for physical access controls and the security of the infrastructure that supports the electronic health records (EHR) systems.

The financial burden of this compliance is baked into the General and Administrative (G&A) expenses and capital planning. For the full fiscal year 2025, Healthcare Realty Trust Incorporated is guiding for G&A expenses between $46 million and $49 million. A portion of this budget is defintely allocated to legal counsel, IT security audits, and physical security upgrades to mitigate the risk of a breach that could trigger massive fines for tenants, and consequently, threaten lease stability.

Here's the quick math on the compliance challenge:

• HIPAA fines can range from $100 to $50,000 per violation, with an annual maximum of $1.5 million.
• A major cyberattack on a large healthcare system in 2024 showed the scale of the risk, costing the parent company an estimated $3 billion for response and recovery, a risk that influences every tenant's financial stability.
• Healthcare Realty Trust Incorporated must ensure its leases clearly define the tenant's responsibility for PHI, protecting the REIT structure.

Compliance with evolving building codes and accessibility standards (ADA).

As an owner of over 600 properties totaling over 36 million square feet, ensuring compliance with the Americans with Disabilities Act (ADA) and local building codes is a continuous capital expenditure item. This isn't a one-time fix; it's an ongoing investment to maintain the quality and usability of the portfolio.

The company funds significant capital projects to keep its medical office buildings (MOBs) modern and compliant. In 2024, the company funded $150.6 million toward development and redevelopment of properties, which includes compliance-driven upgrades.

Furthermore, Healthcare Realty Trust Incorporated is actively pursuing green building certifications, aiming for at least 11% of its portfolio to hold LEED, ENERGY STAR, or IREM CSP certifications by 2025. This pursuit of certification often requires capital improvements that overlap with and exceed basic building code requirements, such as energy efficiency and indoor environmental quality, which helps future-proof the assets against stricter environmental and accessibility regulations.

Zoning and land use regulations affect the ability to expand or redevelop properties.

The ability to grow the portfolio through new development and redevelopment is a key value driver, but it is entirely dependent on local zoning and land use approvals. Healthcare Realty Trust Incorporated utilizes a redevelopment classification for properties where management has approved a change in strategic direction through the application of additional resources, including capital expenditures significantly above routine maintenance.

The risk is in the timeline: a single zoning board delay can push a project's completion past the five-quarter waiting period before it's included in the Same Store pool, delaying the realization of higher returns. For instance, new construction rents in the healthcare real estate market can be 40% or more higher than existing rents due to elevated construction costs, making the timely completion of a redeveloped asset crucial to the overall financial performance.

This is why the company's strategic focus on selling non-core assets, like the $60 million sale of two MOBs in Milwaukee, Wisconsin, is also a legal/regulatory play-it reduces exposure to markets where expansion may be difficult or where the regulatory environment is less favorable.

Potential changes to the Affordable Care Act (ACA) create long-term policy risk.

The ACA is the single largest policy risk because it dictates the financial health of Healthcare Realty Trust Incorporated's tenants. The stability of the healthcare system, and thus the ability of providers to pay rent, is directly tied to government reimbursement and insurance coverage rates.

The most immediate near-term risk is the expiration of ACA marketplace premium subsidies at the end of the 2025 fiscal year. This expiration is projected to increase the uninsurance rate by 16%. A rise in uncompensated care for tenants-hospitals and clinics-translates directly into margin pressure, which could eventually impact their ability to maintain high tenant retention rates, which stood at a strong 88.6% in Q3 2025.

However, there are also regulatory tailwinds. A proposed Centers for Medicare & Medicaid Services (CMS) rule expanding outpatient eligibility is expected to shift certain surgical procedures to outpatient settings. This is a positive for Medical Office Buildings (MOBs) and Ambulatory Surgical Centers (ASCs), assets in which Healthcare Realty Trust Incorporated specializes, as it drives greater demand and utilization of their properties.

Here is a summary of the 2025 ACA-related policy impacts on the sector:

Finance: Monitor the Q4 2025 tenant collection data closely for any early signs of stress from the subsidy expiration.

Healthcare Realty Trust Incorporated (HR) - PESTLE Analysis: Environmental factors

What this estimate hides is the specific impact of the large-scale integration of the HTA portfolio, but the core action remains the same: Healthcare Realty Trust Incorporated needs to aggressively manage its debt maturities against the current interest rate environment. Finance: Stress-test the 2026 debt maturity schedule against a 6.0% interest rate scenario by month-end.

Growing pressure from investors for detailed ESG (Environmental, Social, and Governance) reporting.

Investor demand for clear, comparable environmental data is not slowing down; it's now a cost of capital issue. Healthcare Realty Trust Incorporated (HR) is responding by aligning its disclosures with the Task Force on Climate-Related Financial Disclosures (TCFD) and the Sustainability Accounting Standards Board (SASB). This transparency is paying off: the company earned a GRESB (Global Real Estate Sustainability Benchmark) score of 76 with a 2 Green Star rating in its 2024 assessment, ranking second in its peer group. Plus, it received an A Public Disclosure rating for the fifth consecutive year. This defintely helps secure access to green financing, which can lower borrowing costs.

Focus on reducing carbon footprint through energy-efficient building retrofits.

The core of environmental strategy boils down to reducing operational expenses, and energy is one of the biggest. Healthcare Realty is actively deploying capital to cut utility costs and carbon emissions across its portfolio. In 2024, the company invested $15.5 million in 451 efficiency projects, which is a concrete commitment to long-term savings. The immediate result of these efforts is tangible, as evidenced by the year-over-year performance data.

Here's the quick math on the 2024 environmental performance:

• Energy consumption decreased by 6.4%.
• Scope 1 and 2 Greenhouse Gas (GHG) emissions decreased by 10%.
• Water consumption decreased by 2.8%.

The long-term targets set over a 2022 baseline show where the company is headed:

Increased risk from extreme weather events (e.g., hurricanes, floods) in coastal markets.

As a major real estate investment trust (REIT) with a portfolio of 579 properties in 28 states as of September 30, 2025, Healthcare Realty's exposure to physical climate risk is material. Your portfolio is concentrated in high-growth markets, but some of those markets-like Houston, TX, and Charlotte, NC-are increasingly susceptible to extreme weather events. The company uses S&P Trucost and Climanomics tools to assess property-level risks from acute hazards, such as floods, wind, and named storms, which is a smart move. Mitigation isn't just about insurance, but also about strategic capital planning and emergency response plans at the local level.

The geographic concentration in markets prone to climate events means the cost of comprehensive property insurance, which the company maintains to mitigate exposure, is a growing operational expense. For example, a significant portion of the portfolio is in the following major markets, many of which face high flood or hurricane risk:

• Dallas, TX: 9.8% of portfolio square footage.
• Houston, TX: 5.0% of portfolio square footage.
• Charlotte, NC: 5.6% of portfolio square footage.

Green building certifications (e.g., LEED) are becoming a competitive necessity for new construction.

Green building certifications like LEED (Leadership in Energy and Environmental Design), ENERGY STAR, and IREM Certified Sustainable Property (IREM CSP) are no longer just a nice-to-have; they are a competitive necessity for attracting high-quality tenants and accessing preferential financing. Healthcare Realty is actively pursuing this, achieving 22 new green building certifications in 2024 alone. This increased the total certified area to 6.3 million square feet.

The company's short-term goal for 2025 is to obtain green building certifications for at least 11% of the total portfolio. With the 2024 coverage already at 10.9%, they are essentially on track to meet this target. Also, the company's revolving credit and term loan agreements are sustainability-linked, meaning achieving these certification goals can directly lead to an interest rate discount, which is a clear financial incentive. This is how environmental stewardship translates directly to the bottom line.