Category: All News

The New Tariff Landscape: Reshaping America’s Commercial Property Markets

The second Trump administration has placed tariffs at the center of its economic strategy, wielding them as instruments to recalibrate trade balances and revitalize domestic manufacturing. This policy shift creates a transformative dynamic for commercial real estate investors, developers, and tenants who must now adapt to an uncertain economic terrain.

Economic Reverberations

The financial strain of tariffs will likely hurt American households’ wallets in the near term, with projections indicating an additional $1,200 in annual expenses for typical families. This belt-tightening translates to upcoming economic headwinds—potentially shaving 0.4 percentage points from GDP growth while simultaneously pushing inflation measures upward. The Fed’s preferred inflation gauge, Core PCE, could hover around 3.1% throughout 2025, significantly overshooting the central bank’s 2% target.

This creates a delicate balancing act for the federal reserve. Should tariff-induced price escalations embed themselves into wage structures, the Federal Reserve might maintain current interest rate levels. Alternatively, if the economy stagnates while price increases prove transitory, the Fed could pivot toward stimulative rate cuts. This monetary policy uncertainty directly influences capital costs for property acquisitions, refinancing, and development projects.

Construction Realities and Development Dynamics

The development sector stands particularly vulnerable to tariff pressures, as construction budgets could swell by 3-5% under a regime of 25% tariffs on North American imports alongside elevated duties on Chinese goods. This cost increase threatens to sideline development projects industry wide across all asset classes.

These supply constraints could create varied outcomes. Initially, property fundamentals might strengthen in markets where new deliveries pause, allowing demand to absorb recent inventory expansions. However, extended development droughts could eventually create supply deficits in sectors already experiencing tight vacancy, particularly in prime office submarkets where flight-to-quality trends continue to drive demand.

Investment Landscape

Despite near-term turbulence, several factors provide underlying support for commercial real estate investment. The dollar’s recent depreciation enhances America’s attractiveness to international capital, while projections for stabilizing or decreasing interest rates—with the 10-year Treasury yield recently slipping under 4%—offer a relatively appealing financing environment.

If the tariff strategy creates a manufacturing renaissance in the US, it could bolster property demand across asset classes in manufacturing focused regions, creating geographic bright spots amid broader uncertainty.

Strategic Positioning

For property investors, the current environment demands strategic deployment of capital. The most exposed industries include those with globally dispersed supply networks, offshore production facilities, and significant stateside revenue generation. Conversely, sectors with minimal imported goods exposure—such as financial services and healthcare operations—stand relatively insulated from direct tariff impacts.

Investors should leverage this transitional period to capitalize on temporarily discounted asset valuations and favorable financing while concentrating portfolios around properties demonstrating tenant stability, pricing resilience, and strong fundamentals. Healthcare real estate continues to be a fundamentally robust asset class, attracting new investors eager to allocate capital to investments that offer greater resilience during economic downturns. The sector benefits from strong, sustained demand for healthcare services, capital-intensive tenancy, and favorable demographic trends, all of which position it for continued growth and stability for decades to come.

Maximizing ROI Through Strategic Healthcare Real Estate Leasing: A Win-Win for Investors and Practitioners

In today’s healthcare real estate market, strategic leasing approaches can significantly enhance returns for property investors while creating optimal environments for clinical practice success. When landlords and medical tenants align their interests, both parties benefit from improved financial outcomes and operational efficiency.

Tenant Mix: The Foundation of Property Value

A thoughtfully curated tenant mix serves as the cornerstone of successful healthcare properties. Complementary medical specialties drive natural patient referrals between practices, increasing foot traffic and patient volume for all tenants. Strategic anchor tenants provide stability while specialty practices add diversity, reducing vacancy risk and creating a more resilient property.

For clinical practices, being part of a well-designed medical ecosystem means greater patient capture and streamlined referral networks, directly impacting practice growth and profitability.

Location 

Modern healthcare location strategy extends beyond basic population metrics. Accessibility, visibility, and proximity to complementary healthcare services all significantly impact both property value and practice success. For investors, properties with superior healthcare-specific location attributes command premium lease rates and experience lower vacancy rates.

Clinical practices benefit from reduced patient acquisition costs and improved patient retention when situated in locations that align with their specialty and patient demographic. The right location can make the difference between a thriving practice and one that struggles to maintain volume.

Lease Structure Innovation

Innovative lease structures that balance investor returns with practitioner needs represent a significant opportunity. This balancing act often requires lots of creative problem-solving, but the resulting agreement can set both parties up for success.

Thoughtful TI allowance strategies can attract quality tenants, focusing on improvements that enhance both practice efficiency and long-term property value.

Options for expansion, extension, or relocation within a property give practices flexibility and security, while giving investors tenant retention advantages.

Rent abatement on the front end of a lease can help a practice ramp up a new location, while owners can often make up this income by adding the same number of months onto the end of the lease term at the higher ending rate.

Infrastructure Investment

Strategic infrastructure investments create competitive advantages for healthcare properties. High-capacity power systems, enhanced HVAC capabilities, extensive plumbing availability and advanced connectivity infrastructure can command premium lease rates while reducing future capital requirements and also give clinical practices the infrastructure needed to support modern care delivery.

Collaborative Planning Approach

The most successful medical buildings foster ongoing collaboration between investors and practitioners. Regular communication about evolving practice needs, upcoming lease expirations, and property improvement plans creates opportunities to align interests before critical decision points arise.

Case Study

A compelling example of strategic healthcare real estate leasing in action is the Davis collaboration with HealthEast (now MHealth Fairview) to create a destination ambulatory hub adjacent to a suburban hospital. HealthEast sought to consolidate its ambulatory clinics from the hospital and various medical buildings on and near campus into a single location designed to optimize the ambulatory experience.

What makes this project exemplary is the dramatic growth in demand it experienced. Davis expanded the building twice during construction—first from 80,000 sf to 120,000 sf, and then to 148,000 sf. This exceptional demand stemmed from multiple factors:

  • Strategic Location: The property’s proximity to the hospital created a natural healthcare ecosystem while offering superior visibility and access for patients
  • Tenant Synergies: As complementary specialties signed on, referral opportunities increased, driving interest from both HealthEast departments and independent practice groups
  • Purpose-Built Design: The facility’s modern infrastructure and patient-centric layout offered efficiencies unavailable in older properties, compelling additional practices to relocate

This case demonstrates how strategic planning and collaborative approaches create value for all stakeholders. The providers gained an optimized clinical environment enhancing patient experience, while the property achieved exceptional occupancy and value through thoughtful development.

Davis Partners with Shriners Children’s to Create a New Home for Compassionate Care

In the heart of Woodbury’s thriving CityPlace development stands a testament to what happens when expertise meets compassion. CityPlace Medical II is a 42,000-square-foot state-of-the-art medical outpatient facility that was developed around the needs of its anchor tenant, Shriners Children’s—a renowned 501(c)(3) non-profit organization dedicated to providing specialized pediatric care regardless of families’ ability to pay.

A Mission-Driven Partnership

Shriners wanted to transition from their Minneapolis-owned hospital location to a more accessible outpatient facility, ultimately hiring Davis as its advisor because of their unparallelled real estate expertise within the healthcare industry.

“This project was unique because Shriners was accustomed to owning their real estate,” explains Mark Davis, CEO. “Our team’s deep understanding of the intricacies within the healthcare real estate (HRE) sector allowed us to guide them through the leasing process while honoring their mission-focused approach.”

The Davis team’s expertise and comprehensive understanding of the HRE market enabled Jill Rasmussen, CCIM, SIOR to successfully navigate Shriners’ local and national board approval processes, negotiate a waiver for a major use exclusive, and maintain a timeline that aligned perfectly with the sale of Shriners’ existing hospital—all during a global pandemic.

Creating a Healing Environment with Sustainable Design

To fulfill Shriners’ mission of providing compassionate care in a family-centered environment, Davis partnered with Synergy Architecture Studio and Timco Construction to develop a facility that seamlessly blended healing aesthetics with practical functionality. The building’s thoughtful design features a carefully selected palette of textured brick, honed stone, tinted glass, and warm gray metal, allowing it to complement the other buildings within the CityPlace development while creating a distinctive identity for Shriners.

To ensure a peaceful healing space was created for the children and families the facility was to serve, floor-to-ceiling windows were utilized to maximize natural light and bring the beauty of the world outside within. Chocolate marble stone was selected for its timeless yet grand appeal to guide visitors from the entrance to the lobby, where warm wood textures and a fun, vibrant color-scheme were incorporated to create a soft, safe and welcoming atmosphere for its young visitors.

This masterful design incorporates sustainability throughout, using daylight to reduce electrical needs, offering high-efficiency mechanical systems and incorporating sun shading to decrease energy consumption. The building also connects to Woodbury’s stormwater reuse system, meeting the city’s rigorous environmental standards—another example of Davis’s commitment to creating healthcare spaces that exceed expectations in both patient experience and environmental responsibility.

“Everything from the site’s extensive landscaping to its grand windows and cascading accents has been thoughtfully designed to create a medical destination that is both visually impressive and comfortably functional for Shriners’ young patients,” notes Davis.

A Community Success Story

Despite the ever-evolving complexities related to completing a large-scale development project during a pandemic, CityPlace Medical II opened on time and on budget in June 2020. The building’s exceptional design and functionality quickly attracted additional tenants, including Adefris & Toppin, bringing occupancy to 70% well before opening day and fully leased soon after.

Most importantly, Shriners Children’s now has a brand new facility in a prime location to provide their specialized pediatric care to children throughout Minnesota and western Wisconsin. Here, their team offers treatment for orthopedic conditions, injuries , and other specialized needs in a compassionate, family-centered environment.

The CityPlace Medical II project demonstrates what’s possible when development expertise aligns with a meaningful mission. For Davis, it represents our continued commitment to creating spaces where healthcare providers can deliver exceptional care to those who need it most.

About Shriners Children’s

Shriners Children’s provides orthopedic care for children whose conditions may include: complex conditions such as cerebral palsy, spina bifida, scoliosis, limb difference, arthritis and muscular dystrophy; rare disorders such as osteogenesis imperfect, achondroplasia (dwarfism) and arthrogryposis. Care is available for injuries, whether they are the result of a sporting activity or general play.

Occupational and physical therapy, custom orthotic braces, helmets and prosthetic limbs, and low dose radiation x-ray images in our EOS Imaging System are all available inside the clinic. Providers at Shriners Children’s know how to care for children’s bones, joints and muscles. They understand growing bones and growth plates and work closely to provide customized, family-centered care to all patients. The ultimate goal of the entire staff at Shriners Children’s is to help kids be kids no matter what kinds of health challenges they face.

All care and services are provided regardless of the families’ ability to pay or insurance status. Anyone can refer a patient to Shriners Children’s. To schedule, call 612-596-6105 or visit online at shrinerstwincities.org.

Davis Property Management Team Makes a Difference with “Cooks for Kids”

The Davis Property Management team recently demonstrated the #DavisDifference by participating in the Ronald McDonald House Charities’ (RMHC) “Cooks for Kids” program, preparing and serving meals to families facing challenging hospital stays.

Supporting Families During Difficult Times

Ronald McDonald House Charities operates five locations across Minnesota, providing critical support to families with children receiving medical care. These facilities can host over 70 families each night and serve several hundred family members each day, offering much more than just a place to stay. Families receive warm meals, laundry services, respite spaces, childcare, K-12 schooling services, and a variety of supportive programming during what are often lengthy and emotionally taxing hospital stays.

The five RMHC locations partner with four children’s hospitals across the Twin Cities and Duluth, including MHealth Fairview Masonic, Children’s and Gillette Children’s, and Essentia Health, creating a comprehensive support network for families in medical crisis.

The Power of Volunteer Service

The Ronald McDonald House relies heavily on volunteers and donations to prepare and serve two meals daily to resident families. These volunteer opportunities not only nourish the families staying at the facilities but also create powerful team-building experiences for the volunteers themselves.

“The process of both preparing and serving meals for the families staying on campus was humbling and rewarding,” said Davis team member Alicia Schaeffer who helped coordinate the Davis volunteer effort. “These families are going through incredibly difficult and challenging situations. Through the Cooks for Kids program, meal time becomes one less thing they need to manage. Plus, meals made with love always taste a little better. We are wholly grateful for the opportunity to serve these brave kiddos and their families.”

Globally, RMHC programs are supported by more than 281,200 volunteers who dedicate their time, talent, and resources. These volunteers truly are the heartbeat of RMHC, helping to offset operational costs and allowing the charity to direct more donations directly to services supporting children and their families.

The Impact of Davis’s Contribution

For the Davis Property Management team, participating in the Cooks for Kids program aligned perfectly with the company’s commitment to community involvement and making a difference beyond their professional services.

“At Davis, we believe in being more than just a healthcare real estate company,” said Peggy Schatz, Vice President of Property Management. “Our team members are dedicated to improving the communities where we live and work, and programs like Cooks for Kids allow us to make a direct, positive impact on families facing difficult circumstances.”

The team’s volunteer effort exemplifies the #DavisDifference—a commitment to excellence, compassion, and community support that extends beyond business operations and into meaningful service that touches lives when they need it most.

For those interested in volunteering with Ronald McDonald House Charities, use this link to learn more about the Cooks for Kids program and other volunteer opportunities: http://bit.ly/42eRnGO

What’s Next for Healthcare Real Estate — Strategic Design & Construction Trends You Can’t Afford to Ignore

In today’s fast-shifting healthcare environment, real estate decisions are no longer about reacting to lease deadlines—they’re about future-proofing strategies. As industry pressures like inflation, rising labor costs, and shifting care models reshape what “smart planning” really means, the old approach of “wait and see” is officially over.

During last month’s HLAMN Conference at the Saint Paul RiverCentre, Architect Matthew O’Keefe of Synergy Architecture Studio discussed current real estate trends with Michael Sharpe of Davis and Tim McKee of Timco Construction during an exclusive panel focused on how healthcare organizations can deploy design-forward thinking to create healthcare spaces that support the idiosyncrasies of independent practices while maximizing ROI.

Real Estate Enables Strategy

According to Sharpe, the most successful healthcare systems aren’t just reacting to expiring leases or crowded clinics. They’re taking a long-term, proactive view. “Real estate isn’t strategy, but it enables strategy,” he reminded the audience. That means aligning space with both the realities of today’s care and the anticipated demands of tomorrow.

Outdated layouts, undersized exam rooms, and inflexible infrastructure often hinder efficiency. But waiting until these issues hit crisis mode can lead to rushed, expensive decisions. Planning two to three years out gives leaders the space and savings they need to make informed moves.

Designing for the Now While Building for What’s Next

O’Keefe emphasized the growing need for adaptable, well-sized clinical environments, particularly as healthcare providers expand into outpatient services and increasingly diversified care models. From accommodating full families in exam rooms to designing for multi-functional use, today’s clinics are anything but cookie-cutter.

“It’s about designing backwards from the workflow,” O’Keefe shared, noting how pre-design collaboration saves both time and square footage down the road. “Integrating teams from day one (architects, contractors, and strategic real estate advisors) allows for smarter space planning and quicker delivery, both of which our clients and partners highly value.”

Building Smart, Staying Flexible

On the construction side, McKee pointed to rising labor costs and lingering material expenses, but also to a powerful lever for both cost control and adaptability: pre-manufactured construction.

Systems like DIRTT allow clinics to move walls, upgrade tech infrastructure, or reconfigure layouts with minimal downtime. “You’re back in business the next day,” McKee explained. With depreciation treated more like furniture than traditional drywall, these systems are also budget-friendly over the long haul.

“This kind of flexibility isn’t just nice to have”, McKee stated. “As healthcare spaces evolve alongside technology, staffing models and patient expectations, it’s essential.”

The Key Takeaway

Design and development should never be an afterthought. Real estate decisions shape operations. Architectural influences optimize delivery. Construction timelines affect growth. When these components work together from the start, healthcare organizations can not only meet today’s challenges—they can design for resilience and longevity.

Anne Madyun Inducted into Midwest Real Estate News Hall of Fame

We are proud to announce that Anne Madyun has been named to the 15th class of the Midwest Commercial Real Estate Hall of Fame (2024) by Midwest Real Estate News Magazine! This prestigious honor recognizes Anne’s exceptional contributions to the healthcare real estate sector and places her among an elite group of industry professionals who excel even in challenging market conditions.

Since joining Davis in 2012, Anne has grown to establish herself as a powerhouse in healthcare real estate. Her impressive achievements include completing over 50 lease transactions valued at nearly $100 million in the past two years alone and leasing five medical buildings to 100% occupancy in a challenging 2024. Anne has consistently demonstrated the qualities that define true Hall of Famers: deep market knowledge, relationship building, and unwavering client service.

Anne’s commitment extends beyond her professional accomplishments to significant community engagement. She served on the MNCREW (Minnesota Commercial Real Estate Women) Board for four years, where she championed diversity, equity, and inclusion initiatives through including the creation of the Culture and Inclusion Committee. Her dedication to creating a more equitable industry where diverse professionals can thrive reflects the volunteer spirit that characterizes Hall of Fame inductees.

In 2023, Anne achieved her CCIM designation and was recognized as a CoStar Power Broker. She maintains active memberships in multiple professional organizations including MNCREW, WiredUp, HLAMN, and MNCAR, and was recently accepted into CREW’s National Healthcare Council.

Please join us in congratulating Anne on this well-deserved recognition of her expertise, innovation, and commitment to both her clients and the broader commercial real estate community.

Celebrating Excellence: Davis Healthcare Recognized by Healthcare Real Estate Insights

We are thrilled to share that Davis has received prestigious recognition from Healthcare Real Estate Insights (HREI) for one of our exceptional projects.

Eagan Specialty Center: Awarded in the ‘Best New Medical Buildings and Other Outpatient Facilities’ Category

Eagan Specialty Center has been honored with the distinction of ‘Best New Medical Building’ in HREI’s 25,000 – 49,999 SF category. This recognition speaks volumes about the hard work and dedication that went into the strategic planning and innovative design of this state-of-the-art facility and we extend our heartfelt thanks to HREI for this incredible honor.

This award is a true testament to the dedication of the Davis team and all collaborating architects, designers, contractors, and partners who worked tirelessly to execute this project both on time and on budget including:

Developer: Mark Davis; Davis

Architect: Synergy Architecture Studio

Contractor: Timco Construction

Lender: Old National Bank

Broker/leasing agent: Jill Rasmussen; Davis

Property manager: Emily Gruenhagen; Davis

Attorney: Kevin Macaddino; Varnum LLP

Structural Engineer: Matt J. Van Hoof; Krech, O’Brien, Mueller and Associates

Civil Engineer: PJ Disch + Doug Loken; Loucks

Mechanical Engineer: John Gorman; Gilbert Mechanical

We are deeply proud of these achievements, and we look forward to continuing to set new standards in healthcare development and design.

At Davis, we remain committed to creating spaces that promote healing, innovation, and well-being for our tenants’ patients and healthcare professionals alike. We are excited to see how our work continues to inspire the future of healthcare real estate.

The Davis Difference: A Collaborative, Client-First Approach to Healthcare Real Estate

Davis Team

In healthcare real estate, expertise is only part of the equation. True success stems from relationships built on trust, a deep understanding of client needs, and the ability to deliver on promises, every time. At Davis, we know that achieving excellence requires more than technical know-how – it demands a people-first approach and a relentless commitment to setting the gold standard across our industry.

What truly sets Davis apart is our unwavering dedication to our clients. 

You’ll never experience the frustration of being handed off from team to team. Instead, you’ll work with one trusted, highly skilled group of professionals who remain with you from start to finish. This continuity is not only rare but transformative – it fosters trust, builds rapport, and ensures that every detail of your project is handled with precision and care.

Our team isn’t just highly capable; it’s extraordinary. 

With deep tenure, high retention, and a shared passion for healthcare real estate, Davis has cultivated an environment where excellence thrives. With approximately 30 team members across four offices in four states (MN, ND, NY, and AZ), Davis brings both reach and relatability to the table. This balance allows us to serve clients nationwide while maintaining the personal, attentive approach that defines our relationships.

Relationships are the foundation of what we do. 

Referrals and repeat clients aren’t just statistics, they’re the embodiment of the trust we’ve built through years of consistent, thoughtful service. At Davis, we’re not just executing transactions; we’re cultivating lasting partnerships. Our clients return not only because of our expertise but because of how they feel working with us – valued, respected, and supported every step of the way.

Davis was founded with a singular focus: to specialize in healthcare real estate. 

This intentionality set the stage for mastering the unique challenges and opportunities of the field, allowing us to create value in ways few can replicate. Over time, this vision has become synonymous with innovation, reliability, and an unwavering dedication to excellence. 

At Davis, we don’t simply execute projects. We champion your healthcare real estate vision with care, insight, and the unshakable belief that every client deserves not just results but an exceptional experience. This is more than our mission – it’s the Davis Difference.

Why the Time is Right to Consider New Development Opportunities

No question. The cost structure for new outpatient medical space has reached unprecedented heights. High interest rates, a tight labor market, supply chain issues, and record inflation have all contributed to the cost of new outpatient medical space crossing the $35 per square foot threshold and in some instances approaching $40 per square foot.  When confronted with this reality, many physician groups have elected to forego growth opportunities and/or put off relocation to upgraded/expanded space.  The status quo may help manage the expense side of the ledger but does not facilitate revenue growth.

In past cycles, low interest rates helped to negate the impact of rising construction costs. No such luck in the current cycle. From 2022 to 2024, construction costs increased by nearly 25 percent. As for interest rates, the Federal Funds Interest Rate went from 3.25% in September 2022 up to 5.5 to August of 2024 (it was recently cut to 5%). Given the reduced amount of construction demand, contractors have reduced their profit margins to stimulate business. 

While rental rates and development costs will not soon, if ever, return to the pre-pandemic baseline, the next 12-18 months should offer some relief and a degree of stability that the market has not enjoyed the past 5 years.

  • Major construction items such as concrete, steel, doors, drywall and lumber have stabilized and even reduced in certain categories.
  • Electric and heating, venting and air conditioning (HVAC) have continued to rise but at a reduced pace.
  • The decrease in oil prices over the past year has led to lower costs for items such as roofing and adhesives.
  • Commodity prices have stabilized.
  • Labor costs will likely continue to rise-estimated at 3-5 percent over the next 12-18 months.

All these factors combine to create a stable construction cost environment. Unless there is a sustained recession, prices/costs will not reduce. The best we can hope for is stable pricing. 

Pent up market demands and wants will eventually burst through and once again put upward pressure on construction and development costs. With occupancy rates in outpatient medical buildings currently at 94 percent, groups looking to for new or expansion space will have limited options. Accordingly, new development is likely going to be the most viable option for growth. 

Groups looking for new or expanded space should aggressively explore options in the near term before the cost structure takes another incremental jump. Delaying action will not lead to lower occupancy costs and will lead to missed opportunities to expand the patient base and grow revenue. Groups that understand this reality and take action in the near term will be much better positioned than those kicking the can down the road and then being forced to take action in a much high-cost environment.