27 BUSINESS OVERVIEW Integrated Annual Report 2025 OPERATING ENVIRONMENT When existing facilities reach overcapacity, the REIT takes measures to act as a strategic partner to enable expansion. This is achieved through strategic cost management at both the property and fund levels to ensure sustainable margins, prioritising acquisitions in high-demand hubs and collaborating with healthcare operators to enhance patient flow and service design. The adoption of virtual healthcare service platforms is reshaping the healthcare delivery model. The surge in telemedicine and digital health services directly influences how physical space is used and requires significant investment in technology integration. While digital platforms provide convenience, they do not replace the need for physical care, instead necessitating a hybrid approach where physical hospitals act as a high-tech hub for complex treatments and digital coordination. To stay competitive, Al-`Aqar ensures that both new and existing healthcare properties are equipped with the infrastructure necessary to support virtual care. Al-`Aqar faces increasing operational pressure from rising inflation, including higher energy and maintenance costs. This follows developing trends such as the commencement of Tenaga Nasional Berhad’s (“TNB”) Regulatory Period 4 (“RP4”), electricity tariffs that increased prices by 13.6%, establishing a rate of 45.4 sen/kWh through December 31, 2027. These environmental and financial costs can impact tenant margins and rental affordability. Furthermore, physical climate-related risks such as flooding and heat stress pose direct threats to the integrity of healthcare assets, where operational uptime is critical for patient safety. Further downstream, healthcare operators continue to manage operating and regulatory challenges, including labour cost pressures arising from clinical staff shortages, exposure to higher utility tariffs, and selected SST on non-core services, as well as regulatory and Talent attraction and retention remain key focus areas, particularly for specialised clinical roles. These challenges are mitigated through operational efficiencies, service mix optimisation, technology adoption, phased capacity planning, and long-term workforce development strategies. The REIT addresses these challenges through targeted AEIs designed to reduce utility costs and improve the environmental footprint of its properties. Climate risks are further taken into consideration through climate risk assessments that are integrated into the REIT’s 8x8 Strategy, alongside implementing preventive maintenance measures. MARKET OUTLOOK AND FUTURE CATALYSTS Looking ahead, Malaysia’s healthcare sector is expected to maintain steady growth. Industry forecasts by Malaysian Industrial Development Finance (“MIDF”) Berhad Research indicate annual growth of approximately 6% to 8% through 2030, reflecting strong fundamentals and ongoing structural demand. This outlook is supported by a combination of demographic shifts, rising healthcare needs, policy support and continued medical tourism momentum. Capital market developments within the healthcare space, including the anticipated listing of large healthcare platforms, are expected to enhance sector visibility and establish clearer valuation benchmarks. Increased investor interest in healthcare-related assets may also contribute to broader recognition of healthcare real estate as a distinct and defensive property segment. Growth is also expected to extend beyond traditional acute care hospitals into adjacent segments such as outpatient services, rehabilitation, diagnostics and elderly-related care facilities. These segments broaden the scope of healthcare real estate demand and further support the long-term relevance of purpose-built healthcare properties. Continued promotion of medical tourism under initiatives such as MYMT 2026 is expected to provide additional demand support for private healthcare facilities and associated real estate assets. Overall, healthcare real estate is expected to retain its defensive investment characteristics, supported by long-term leases, stable occupancy profiles and demand driven by essential services rather than discretionary spending. These attributes remain particularly relevant amid global economic uncertainties and evolving dynamics across traditional commercial property sectors. Operational Resilience, ESG, and Climate Readiness Strategic Asset Management and Portfolio Optimisation Technological Transformation and Digital Innovation
RkJQdWJsaXNoZXIy NDgzMzc=