By Cory Hoffman, Partner, Advisory Services, Edge

The absolute last thing anyone wants is another pandemic. But clinical psychologists, therapists and other health professionals are warning about the emerging mental health pandemic transcending across the country, based on the enduring feelings of fear, isolation, hopelessness and uncertainty that are taking its collective toll on people of all ages. The constant news stream (marked by sensational reporting) that evades our lives, financial difficulties, concerns about health and well being and job losses are all contributing to the rise in anxiety, anger and depression.

Among the many negative repercussions of COVID-19 has been the rise of alcohol and substance abuse, as the general public searches for coping mechanisms to deal with the current environment. This cause and effect have spurred the rise of substance abuse and treatment facilities, both independently-owned and connected with major medical institutions, to combat the growing mental health crisis. These uses are looking to expand but are finding it challenging to locate space, specifically in the DC area. Often times landlords have had concerns that these types of uses will cause issues with other tenants in the building so have turned them away.

As demand increases for these treatment facilities, and most experts agree the country is only at the beginning stages of a protracted battle to combat mental health issues, expect this sector to become an “essential business.” The acceptance of Medication-Assisted Treatment (MAT), which combines prescribed medications in conjunction with personal counseling and behavioral therapies, has rapidly become acceptable in all social strata, and has also contributed to the momentum. These treatment facilities have caught the eye of private equity firms, like Clearview Capital, who acquired Pyramid Healthcare in 2011 and continues to expand its footprint, which are increasingly acquiring operating centers in various sectors including inpatient, outpatient and psychotherapy.

Preferred real estate locations for this use offer some privacy and generous free parking, attributes that are typically found in traditional business campuses found in the suburbs, as well as medical office buildings and retail centers. Previously built-out conversions, that were used for skilled nursing and assisted living concepts, are especially ideal. Because it can be challenging to retain talent for this use, the accessibility of nearby amenities including food options and necessity retail can help recruit and maintain valuable employees.

The Biden Administration is widely expected to pay close attention to the country’s mental health crisis and pass measures to increase spending for behavioral and mental health. These actions may have been foreshadowed in his inaugural address which stated, “few people in our history have been more challenged or found a time more challenging than now.” Action items include loosening restrictions on providing Medication-Assisted Treatment to individuals, particularly those living in inner city and lower demographic areas, and establishing a national plan that mirrors efforts to combat COVID-19.

According to a survey released last year by the Centers for Disease Control and Prevention, approximately 20% of all adults reported symptoms of anxiety or depression pre-COVID, a number that has risen to more than 30% several months later. In addition, more than 11% of all adults had seriously considered suicide.

Expect behavioral and mental health brands such as Pinnacle Treatment Centers to increase in frequency as investor groups and medical institutions recognize the opportunity and the need to accelerate locations. No age group is immune from the malaise and many experts fear that young people may be more seriously impacted by the removal of social activities, increased isolation and the overall feeling of fear and anxiety. This is expected to increase mental health awareness in schools and daycare centers.

The DC market and its barriers to entry, its lack of suitable space and high costs, make it a difficult market for industry users to expand into. Many of the big-box retail stores going dark could make interesting conversions into a multi-tenanted property containing inpatient, detox, outpatient, testing and other related services.

Cory Hoffman is Partner, Advisory Services for Edge. The commercial real estate firm offers a full complement of advisory, leasing, investment sales, management, construction, property management and engineering services to clients throughout the Washington, D.C., Maryland, Northern Virginia, and Pennsylvania marketplaces. Founded in 2007, the company currently leases and manages more than 8.5 million square feet of commercial office, flex/office, industrial/warehouse, retail and mixed-use space. Mr. Hoffman can be reached at choffman@edgecre.com or 703.334.5612.