Overview of the Pathology Industry and Supersite Trend (Australia, 2025) and beyond

Industry Overview

The pathology sector in Australia forms a vital part of the broader healthcare ecosystem. It underpins 70% of medical decisions, including diagnostics, chronic disease management, and preventative health. The sector is primarily dominated by three players:

• Sonic Healthcare (Douglass Hanly Moir)
• Healius (formerly Primary Health Care)
• Australian Clinical Labs

These operators control approximately 80-85% of the market, while the remaining share is divided among hospital-based services and smaller regional providers.

Key Characteristics:

• High fixed costs and regulatory overheads
• Volume-driven margins: scale is critical
• Heavy reliance on bulk-billing (Medicare reimbursements) – limiting pricing power
• Increases role of automation, AI and digital health records

Current Footprint: Medical Centre Co-location

Traditionally, pathology collection centres are co-located within GP clinics, medical centres, or polyclinics, operating as sub-tenants or under service agreements. This co-location strategy made sense historically for several reasons:

• Patient convenience and walk-ins after GP referral
• Streamlined data sharing and records management
• Cost-effective tenancy models (often under 100 sqm)
• Pathology group subsidies to GPs for referral volume (now heavily scrutinised by regulators)

Emergence of Pathology Supersites (Standalone Models)

What are Supersites?

Pathology Supersites are large, purpose-built, standalone facilities housing:

• Full-service collection suites
• In-house diagnostic labs (or regional hubs with rapid sample transport)
• Imaging or other allied services (in some cases)
• Extended hours, drive-through services, AI-enhanced diagnostics

Drivers of this Shift:

Factor	Description
Regulatory Scrutiny	Tighter ACCC and Medicare compliance is discouraging bulk-billing linked incentives to GPs; separation reduces risk.
Scale & Efficiency	Supersites allow better cost controls, centralisation of staff/resources, and automation (robotics, digital pathology).
Patient Experience	Convenience-driven formats such as drive-through, after-hours, and multi-service sites appeal to consumers.
Technology	AI Integration and high-throughput diagnostics suit larger facilities rather than scattered small clinics.
Data & Cloud Infrastructure	Centralising pathology processing helps manage compliance, cybersecurity, and faster reporting to physicians.

Impacts on Medical Centres and Real Estate

Medical Centres as Landlords:

Risk of vacancy

Where a pathology provider is a long-standing tenant, a move to a supersite model may leave medical centre landlords exposed.

Reduced lease lengths

Pathology providers may seek shorter leases with opt-out clauses as they review portfolios.

Devaluation risk

Medical centres previously valued on fully-leased income models may face yield decompression if pathology tenancies are lost or replaced with lower-value uses.

Competitive Positioning

• Medical centres without imaging, day surgeries, or integrated services may become less competitive.
• Pathology supersites may cannibalise foot traffic from older medical hubs.

Example Trend

Sonic Healthcare and Healius have both piloted and now expanded centralised supersite models in NSW and VIC – typically located:

• In light commercial zones
• On arterial roads or near high-growth catchments
• Near bulk-billing GP megacentres or private hospitals

Future Outlook and Investment Considerations

Likelihood of Supersite Dominance

• High probability in metropolitan and major regional cities by 2027
• Smaller collection points will still be retained in rural areas or where competition is minimal
• Real estate strategy will pivot to fewer but larger footprints

Trends to Monitor:

• Amalgamation of pathology, imaging, and allied health in single hubs
• Rise of digital health referrals (eReferrals) reducing reliance on GP clinic proximity
• More built-to-suit or owner-occupied models by pathology operators
• Use of refrigerated courier networks to decentralise testing from collection

Risk for Investors:

• Legacy tenancies may be at risk of non-renewal
• Existing medical centres may need to reposition or refurbish to attract new tenants
• Rising fit-out costs for high-spec pathology labs limit conversion reuse

Transactional Perspective (Commercial Real Estate Manager View)

As a transactional manager or leasing agent, it’s vital to:

Audit tenancy risk: Identify sites where pathology operators are nearing lease end

Engage with pathology operators: Understand their footprint optimisation plans

Propose long-term pre-commitment deals for standalone sites or hybrid medical hubs

Reassess asset valuation methodology: Future-proofing rental assumptions

Explore repurposing options for vacated pathology space – allied health, minor procedures, or specialty consulting rooms

Summary Table

To discuss any related property matter herein or other issues, please contact
Mark Ruttner, Managing Director

mr@fvg.com.au 0411 419 674

First Valuation Group
Suite 110/181, St Kilda Road, St Kilda, Victoria, 3182
valuations@fvg.com.au