How Federal Funding Uncertainty Is Slowing Healthcare Real Estate Deals

Written by:

Steve Marcinuk

Date:

05 Jan 2026

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Healthcare real estate transactions are taking longer to complete, and the slowdown is driven more by rising concerns about federal funding stability than by weak demand or poor market fundamentals. According to Andie Edmonds, Senior Vice President at Colliers, landlords and tenants are now scrutinizing funding sources more closely before entering long-term agreements, creating new hurdles to closing deals.

“People are just being a little more cautious. They’re doing more due diligence,” Edmonds says. This increased caution is most evident in properties or tenants that rely on federal funding, either directly or through government-backed insurance programs.

The Nonprofit Case Study

Edmonds points to a recent transaction that highlights the trend. Her team is marketing a property leased to a nonprofit behavioral health provider that has operated successfully for over 20 years. The tenant recently signed a new lease, and the property fundamentals are sound. Despite this, buyers are wary.

“We have a property on the market currently, and it has a user in it who is a nonprofit. They’re in the behavioral healthcare sector and have been around for 20+ years. They’re very successful in their niche. And we have the building for sale. It’s an excellent lease, brand new, and everything’s looking excellent,” Edmonds says.

However, potential buyers’ hesitation is not about the tenant’s performance or the quality of the lease. “When we talk to our potential buyers and our network of brokers and investors, the concern is some of the funding,” Edmonds explains.

Buyers are focusing on the tenant’s reliance on federal programs. “We’re talking about a nonprofit that’s federally funded to some extent. There’s private funding, there’s federal funding, and the media, in terms of how they talk about some of the changes that are happening in DC, creates some concern,” Edmonds says.

Increased Due Diligence

This concern is not stopping deals, but it is making them more complex. “I feel confident that we’re going to get this property sold, but we’re having to dig a little deeper. We’re having to really get into where their funding is coming from and what happens if certain funding sources change,” Edmonds says.

Both parties are now conducting more detailed examinations. Edmonds notes that landlords are more closely investigating tenants’ dependence on federal programs. “If they’re a tenant coming into a building and there’s an implication that they’re heavily dependent on some federal program or federal fund, the landlord wants to do a closer inspection of what they’re doing and how they’re funded. That slows everything down,” she says.

Caution Among Tenants

The increased caution extends to tenants as well. Edmonds describes a situation involving a national doctors group that signed a letter of intent for about 6,000 square feet of office space. The space was under contract to be purchased by a primary healthcare system, but the listing broker assured Edmonds that the deal would close and the space would remain available.

“We knew the space we were looking at was in contract. We knew it was with one of the major healthcare systems in the market. The listing broker was not concerned about it. They felt the deal was going to go through and everything would be fine,” Edmonds says.

However, after the letter of intent was signed, the healthcare system decided to occupy all the remaining vacant space in the building, abruptly ending the doctors’ group’s deal. “Our deal was suddenly off the table,” Edmonds says.

While the specifics were unusual, Edmonds says this outcome is part of a larger pattern. Healthcare systems and operators are making more conservative decisions about space and occupancy, often choosing to consolidate or expand their own operations rather than lease to third parties. “What that tells me is that the healthcare system that made that decision is seeing opportunity for growth in this property adjacent to one of their campuses,” she says.

Market Segmentation

Not all healthcare real estate segments are equally affected by uncertainty about federal funding. Edmonds explains that medical office buildings anchored by strong physician groups and serving mostly private-pay patients are largely insulated from these concerns. In contrast, senior housing with mixed funding sources is experiencing moderate delays, while behavioral health facilities and nonprofits that rely heavily on government support face the most significant slowdowns.

“This is not affecting every property or every class,” Edmonds says. The impact is concentrated where tenants’ revenue streams depend most on government sources, particularly in areas subject to changes in federal policy or reimbursement rates.

Broader Implications

Edmonds expects this heightened caution to persist through at least 2026 as investors and landlords adapt to ongoing policy uncertainty. The immediate effect is that healthcare real estate deals are becoming more complicated, requiring more expertise in funding mechanisms and policy risk assessment.

“Overall, it’s a stable market,” Edmonds says of healthcare real estate. But stability does not mean transactions are simple. Deals are still closing, but they are taking longer and require more detailed analysis than in previous years.

Colliers’ Strategy

To address these new challenges, Edmonds’ team at Colliers has developed specialized resources. The firm’s Healthcare Fellows program equips brokers with dedicated healthcare expertise and access to specialized data and market intelligence not available in general commercial real estate databases.

“The dedication Colliers has to healthcare and the growth of that market is important and was very attractive to me,” Edmonds says. “We’re talking particular, specialized demographics and data sets that are only for healthcare.”

Looking Ahead

Whether this more cautious approach to healthcare real estate due diligence becomes standard practice will depend on how federal policy evolves over this new year. For now, Edmonds sees the market adapting by asking more questions and demanding more transparency before committing capital.

As federal funding uncertainty persists, both landlords and tenants are responding by slowing down and examining risk more carefully. This trend is not stopping deals, but it is reshaping the process, requiring more patience and expertise from all parties involved.