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Market remains ripe for medical real estate

Medical real estate continues to stay healthy as healthcare demographic and financial markets remain favorable.

Consistently outperforming other real estate sectors, medical office building (MOB) investment continues to thrive as hospital executives are moving ahead with projects that were on the drawing board. Third party developers like myself, especially now, are bringing much of the product to market, as hospitals are reallocating capital budgets.

Financing Projects:
Spending is tight for hospitals in all aspects. Hospital executives are scrutinizing and over analyzing hospital operations which is why any new developments must be well planned, organized and demonstrate a quick turn around. If hospitals don’t want to finance the project themselves, they look toward third party developers to construct medical office buildings.

I’ve noticed an uptick in this form of activity as it allows hospitals to have capital on hand for physician recruitment and acquisition - two of their more pressing items. Since hospitals are in a cost saving mentality, any new developments must warrant a near proven return on investment.

Make Way for Ambulatory Care:
Urgent care and ambulatory care facilities are a low-cost alternative to hospitals’ emergency rooms where excessive overhead costs and long wait times are all too familiar. Often, these long wait times are caused by non-emergent patients who don’t have a physician themselves or have no where else to go. This is one reason why health systems are adding ambulatory facilities, adjacent to the hospital campus, in order to transfer less urgent cases.

In urgent care surroundings, patients are able to be screened and treated efficiently. These facilities are a great way to capture suburban demographics, provide a reliable referral stream and cater to the community by building closer to them. However, that doesn’t mean on-campus development is over, quite the contrary.  

The Command of the Campus:
As neighborhood outpatient facilities continue to demonstrate favorable returns, the notion of on campus development is not as common as it once was. Let me assure you that while there is great growth in ambulatory style facilities, the campus will continue to be the hallmark of medical development.

The campus is the healthcare hub. With everything so close together, physicians can see more patients, spend time on research and perform other associated duties. The campus model style of development has consistently demonstrated lower vacancy rates, as well as higher rental rates. With so much activity occurring from the hospital and ancillary facilities, developments in this space also helps attract and retain quality physicians.

While the full effects of healthcare reform are a large cause of uncertainty with future development plans, hospitals executives seem to be past their point of contention and are moving, albeit slowly, with expansion plans.

 

James Ellis, CEO, Health Care Realty Development Company, is a nationally recognized successful real estate investor and developer of medical office properties with a comprehensive knowledge of sophisticated real estate transactions, cost effective designs, and efficient property management.

 

Aaron Razavi is Associate Marketing Director at Health Care Realty Development.

 

 

Visit their blog at http://www.hcrealty.com/medicalrealestatedevelopment/

 

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