Taking The Pulse Of The Healthcare Real Estate Market

Chelsea Maddox

Chelsea Maddox

By Chelsea Maddox

The real estate aspect of the healthcare business is evolving and growing, according to industry experts.

Staying ahead of the issues, innovations and trends is vital to this sector of the commercial real estate market.

These and other topics will be discussed this week at the 2014 BOMA Medical Office Building and Healthcare Facilities Conference in Nashville, Tenn.  Some of the discussion points on the BOMA agenda and how they figure in Metro Phoenix include:

>> Healthcare providers: An increasing emphasis is being placed on the branding of their organization by healthcare systems and physician groups. Establishing visibility and prominence of the hospital or clinic’s physical location by utilizing retail principles, coupled with the creation of advertising campaigns, has become noticeably important in this market.

>> Facilities: In Metro Phoenix, the placement of healthcare facilities and medical office space in general is evolving with a focus on pinpointing the perfect location through demographic studies. For a health system or physician group, selecting a prime location with visibility and proximity to where its targeted patients live, work and shop, is key within their growth strategy.

 A tremendous amount of emphasis is also being placed on the efficiency of the space the entity will occupy. In this case, efficiency means the facility may be geared toward accommodating a growing volume of patients who now have health insurance through the Affordable Care Act and maximizing the utilization of existing real estate the healthcare organization or physician group is occupying.

 Additionally, far more attention is being given to the interior design of these spaces, including the flow of office traffic, aesthetics and overall ambiance of the space.  Delivering a positive, pleasant and comfortable patient experience has become increasingly important. Retrofitting existing, aged properties to meet these needs can be quite costly, and at a time where capital is tight for most healthcare organizations, relocating to a new, modern facility becomes a viable option. As a result, many medical office buildings of the past may become obsolete which will spur new development to satisfy this upcoming demand.

>> Modifying partnerships: In Metro Phoenix, strategic partnerships and collaboration appear to be the focus of most involved in the healthcare arena. Over the past two years, many physicians have become employed by health systems. In doing so, doctors are able to focus on the practice of medicine without the stress and overhead associated with owning and operating a medical practice.

The remainder of the marketplace – the physician groups not employed by a health system – is moving in one of two directions: 1) Joining forces with other specialty physician networks, or 2) aligning themselves with group health coverage providers.

 In either of these cases, these doctors are offered a certain degree of flexibility and involvement in the group’s decision-making that the employed physicians aren’t, while still benefitting from the purchasing power and economies of scale provided by the larger affiliation or parent network.

>> Technological changes and challenges: In Metro Phoenix, a functional medical property needs to host the infrastructure necessary to accommodate electronic medical record (EMR) storage and transmission. Connectivity alone is one of the key components or requirements of most organizations as they expand and grow in our market.

 Physician groups and health systems alike acknowledge that, with the perpetual evolution of technology, keeping their practice or clinic site at the forefront – utilizing technology to its fullest – will allow them to provide their patients with the best experience while also maximizing the utilization of their staffing resources.

Many physician offices are now offering electronic check-in kiosks versus interaction with a receptionist upon entry. Also, patient information portals via secured websites have grown in popularity for the transfer of information, delivery of test results, and scheduling appointments – both of which allow for the scale-back of staffing requirements and also reducing the number of times the patient actually needs to be seen for follow up visits at the doctor’s office.

 Also trending, E-Medicine, or subscription-based care, has become more predominant, removing the need for real estate altogether. This E-Medicine service is offered to any potential subscriber owning a computer and webcam. For a small monthly fee, it allows patient to request an unlimited number of Skype consultations with an on-call physician, 24/7, who then will assess and diagnose the patient’s condition and call in prescriptions.

>> Governmental regulation: Maintaining a healthy understanding of regulatory compliance in the ever-evolving healthcare sector, as it pertains to hospitals and their corresponding satellite facilities, remains hugely important for most health systems in Metro Phoenix and elsewhere.

 A seasoned healthcare-focused broker involved in the healthcare real estate arena in its current condition, must learn, understand and continually expand their knowledge of any and all compliance-related concerns if they are to be of the highest and best level of service to their clients.

>> Real estate investors: As a result of healthcare reform and the implementation of the Affordable Care Act, we can expect to see an accelerated demand for and increased investment in healthcare-associated commercial real estate.

 The National Real Estate Investor estimates that, nationally, an additional 64 million square feet of medical and insurance related space will be needed to accommodate increased services and recently insured lives… Savvy investors acknowledge this fact – most notably REITs with capital to place – and as a result, good quality, well-located medical office product has been quick to trade during the past 18 months.

In Metro Phoenix, I predict that healthcare-associated real estate investment activity will continue to blossom, especially with the vision of multiple new healthcare-focused development projects on the horizon.

Chelsea Maddox is Director of Brokerage Services, Healthcare Practice Group, at Cushman & Wakefield of Arizona, Inc. Her duties include providing comprehensive healthcare real estate consulting services and representation on the leasing and sales of medical office space to owners and tenants.

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