In the behavioral health sector, a growing trend has emerged: providers are increasingly opting to lease rather than purchase real estate as part of their broader behavioral health facility strategy. This decision is driven by the need to maximize capital for operations and patient care—a priority shared by investors and providers alike. Leasing allows companies to expand rapidly without tying up funds in property ownership, which can be particularly attractive for startups and private equity-backed organizations. The trend is so pronounced that some established behavioral health operators have sold entire facility portfolios to real estate investment trusts (REITs), while newer national players often avoid owning property altogether. For many of these companies, commercial real estate development isn’t even part of their organizational structure.
Charles Watkins, vice president of development at Nashville-based Oman-Gibson Associates (OGA), explained, “A lot of these behavioral health providers are kind of startups. They are new companies with private equity backing, and they are ready to go. All they need is a location. Many executive teams don’t have any real estate development experience, so they look to outsource that.” Before the pandemic, low capitalization and interest rates, combined with high demand for health care facilities, made property ownership viable for operators. Today, however, most providers are less interested in owning their buildings outright.
The Impact of Telehealth on Real Estate Needs
The rise of telehealth in behavioral health has also influenced this trend. Telehealth allows patients and providers to interact without a physical office, reducing the necessity of owning a facility. Yet purely digital behavioral health companies face challenges in meeting patient needs, particularly for services requiring in-person interaction or medication management. Regulatory uncertainties further complicate the digital-only approach, reinforcing the importance of local, community-based care.
Leasing remains a flexible and cost-effective solution. Spero Health, an outpatient addiction treatment provider, exemplifies this approach. CEO Steve Priest explained, “We’ve made a conscious decision not to own real estate. We think our capital is better spent providing care.” Founded in 2018, Spero Health operates 92 locations across six Ohio Valley states. By leasing properties, the company can open more centers quickly while targeting specific features such as medical zoning, proximity to hospitals, public transportation access, and space for future expansion. This approach supports rapid growth in a highly competitive market and demonstrates a clear behavioral health facility strategy focused on efficiency and patient access.
Outpatient Care and the Flexibility of Leasing
Outpatient care models benefit greatly from leasing, as they require less specialized infrastructure than residential or inpatient facilities. Leasing allows behavioral health providers to focus on patient care rather than building maintenance, property taxes, or long-term capital investment. Spero Health, for example, prioritizes properties that are turnkey or require minimal modifications, ensuring rapid deployment and cost efficiency—a critical component of their behavioral health facility strategy.
Hybrid care models, which blend in-person and telehealth services, also influence real estate needs. Evan Lengerich, co-founder and CEO of Denver-based The Collective, explained that their offices are “consumer-centric” rather than traditional medical spaces. Located in Class A or B office buildings near other health services like dental or dermatology practices, these spaces prioritize accessibility, parking, and privacy. Lengerich added, “The feel, the look, the general aesthetics of the office are less medical and more retail consumer.” Leasing allows The Collective to scale efficiently into new markets, including strategic acquisitions in New York City, while maintaining a patient-centric design and operational efficiency. Their leasing model is central to their behavioral health facility strategy, emphasizing flexibility and rapid deployment.
Intensive Care Facilities and Real Estate Challenges
Providers delivering higher-acuity services, such as residential treatment, partial hospitalization programs (PHP), and intensive outpatient programs (IOP), face more complex real estate challenges. Alsana Inc., an eating disorder provider in Westlake Village, California, seeks home-like environments for patients while adhering to strict local zoning requirements. Residential treatment facilities must balance patient privacy and comfort with compliance, making property selection critical.
Ronda Cannon, Alsana’s regional director of development, noted, “The more acute the care, the more difficult it is to repurpose a facility. Outpatient care is much easier with zoning and community acceptance.” Alsana has employed creative solutions, converting former nursing homes or office buildings into residential treatment centers. In one example, Alsana acquired a three-level office building, demolished much of the interior, and created six bedrooms, offices, meeting spaces, and public amenities. The company then partnered with OGA on a sale-leaseback arrangement, balancing ownership benefits with operational flexibility. These decisions form the backbone of their behavioral health facility strategy, ensuring patients receive appropriate care in suitable environments.
Charles Watkins added, “The story changes for more severe levels of care, often leaving providers to get creative in the types of real estate they seek. We’ve seen behavioral health facilities go into office buildings, homes, former lodges, farms, and even former YMCAs.” These adaptations not only address zoning restrictions but also enable providers to deliver care in environments that meet patient needs while maintaining operational efficiency, a core principle of a strong behavioral health facility strategy.
Navigating Stigma and Zoning Challenges
Despite a general decline in stigma toward behavioral health care, local opposition to facilities remains an ongoing challenge. Watkins observed, “On the ground level, there’s still very much that ‘Yeah, that’s fine and dandy, but not in my backyard.’” Zoning restrictions and community resistance require providers to be proactive in communicating their goals and the needs they serve. Transparent engagement with local decision-makers is critical to navigating these challenges successfully.
Some creative solutions have emerged, such as repurposing local bed-and-breakfasts for overnight care. These properties offer a homelike experience while remaining compliant with local regulations. By leveraging unconventional real estate options, providers can maintain patient-centered environments and expand services without confronting traditional zoning barriers head-on—another aspect of an effective behavioral health facility strategy.
Notable Exceptions to the Leasing Trend
While leasing dominates outpatient and general behavioral health operations, some large operators continue to own significant portions of their real estate. Universal Health Services (UHS), one of the largest behavioral health operators in the U.S., owns approximately 86% of its behavioral health facilities. Acadia Healthcare, the largest pure-play behavioral health provider, owns about 39% of its facilities. Both companies operate high-acuity care settings where property ownership can offer operational stability, control over facility design, and long-term cost savings.
On the outpatient side, however, leasing remains the norm. LifeStance Health Group, based in Scottsdale, Arizona, leases all 652 of its centers across 32 states. This approach allows the company to focus on rapid expansion, operational efficiency, and patient-centered service delivery without the financial and logistical burdens of property ownership, reflecting a carefully executed behavioral health facility strategy.
Strategic Advantages of Leasing
Leasing real estate offers multiple strategic benefits for behavioral health providers:
- Rapid Expansion: Leasing allows providers to open new locations quickly, responding to market demand without the delays associated with property acquisition or construction.
- Capital Efficiency: By avoiding large upfront investments in real estate, providers can allocate more resources to staffing, technology, and patient care programs.
- Operational Flexibility: Leased properties can be adapted or relocated as market conditions change, allowing providers to optimize service delivery and scale efficiently.
- Patient-Centric Design: Providers can select spaces that enhance patient experience, such as accessible locations, privacy, and aesthetics, without the constraints of property ownership.
- Reduced Regulatory Burden: Leasing can mitigate some zoning and permitting challenges, particularly for outpatient care models that require fewer modifications to existing spaces.
Conclusion
The behavioral health industry is at a pivotal point where operational strategy and real estate management intersect. Leasing has emerged as the preferred model for most providers, enabling rapid expansion, financial flexibility, and patient-focused care delivery. While ownership remains viable for high-acuity care, outpatient-focused providers increasingly rely on leasing to meet patient needs efficiently.
By embracing leasing, creative property solutions, and community-focused expansion, behavioral health providers can continue to grow their reach, adapt to changing regulations, and maintain the quality of care that patients expect. The implementation of a strong behavioral health facility strategy ensures providers can balance operational efficiency, patient experience, and scalability in today’s dynamic healthcare landscape.
