What A Future Medical Waiting Room Will Look Like

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With healthcare spending forecast to grow by $2 trillion within the next 10 years, transformational technology coupled with a busy younger generation and aging population means that healthcare real estate spaces will undergo a dramatic makeover.

“Your doctor’s office, for example, may soon resemble your neighborhood bookstore or coffee shop instead go your typical “doc in a box” office. Spaces will be more dynamic mainly because of technology,” says David Wilson, Vice President of Real Estate Development, Ryan Companies, US, Inc.

Overall, there will be a lot more open spaces, more windows, less closed doors, more charging stations, tablets and kiosk registrations, Wilson tells GlobeSt.com. The physician’s waiting room will now help keep the patient calm and informed about the latest in healthcare news, and boost the patient’s sense of well-being.

“Waiting rooms and reception areas will face heightened traffic and will respond by creating a more customer-friendly experience. Competition over these new patients will naturally increase as well and so amenities like technology-friendly waiting room furniture, and a “Starbucks-type” look will become more and more important,” says Wilson. “Patients will be able to settle down at a table and access their electronic medical forms or peruse the latest research on wellness and medications.”

Some medical practices will also start offering 30-minute sessions focused on stress management techniques, yoga, acid reflux, youth sports injuries, etc. All sessions will be led by skilled in-house medical professionals.

“Consumer expectations are constantly changing and healthcare, as well as its real estate spaces, will have to change to fulfill the needs of the Gen X, Gen Y and millennial populations,” says Wilson. “Companies such as CVS and Kaiser Permanente have developed health hubs where both convenience and care intersect for the overall care of the patient. If we think healthcare is convenient now, just wait a few more years and it’ll be even more convenient and at your fingertips. Everyone is so busy now and has no time for long office waits. Convenience will be a bigger factor than it even is now.”

 

Source: GlobeSt.

Q3 Medical Office Building Sales Were $2.2 Billion

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After a slow start to the year, medical office building (MOB) sales have picked up in the second and third quarters (Q2 and Q3), providing a strong possibility that the final 2019 volume will top $10 billion for the fifth straight year.

According to two data firms that separately compile their own MOB sales statistics – Arnold, Md.-based Revista and New York-based Real Capital Analytics (RCA) – transaction volume in Q3 topped $2 billion. Both firms’ data shows that year-to-date (YTD) MOB sales through Q3 topped $7.1 billion.

RCA’s data had Q3 MOB sales at $2.35 billion, for a YTD total of $7.28 billion. The firm’s data also indicates that the average capitalization (cap) rate, or the expected first-year yield, in Q3 was 6.7 percent – up from 6.3 percent in Q2 – and the average price per square foot (PSF) of $316, which was down from $326 a quarter earlier.

Revista, which uses different criteria for compiling its MOB sales data than RCA, indicates that Q3 sales totaled $2.2 billion, bringing the YTD total to $7.1 billion. Revista’s data shows that the overall average cap rate for MOB sales was about 6.6 percent in Q3, with the average cap rate for MOB portfolio sales coming in at 6.2 percent and single assets at 6.8 percent. Revista data puts the average PSF for all MOB sales at $323.

Interestingly, Revista data shows that there is still a premium to be paid for on-campus MOBs, which sold for an average of $339 PSF; on the other hand, off-campus facilities had an average PSF of $321.

Revista’s data also indicates the highest quality properties, those in the top 25 percent, sold for average cap rates of 5.8 percent and the absolute highest quality properties selling for cap rates averaging 4.4 percent.

While the YTD MOB sales volume stood at more than $7 billion at the end of Q3, there is a good chance that Q4 will see a strong uptick in volume. This news come by way of a variety of industry professionals as well as 2019’s biggest buyer by far, Toledo, Ohio-based Welltower Inc. (NYSE: WELL).

As HREI reported on Nov. 13, Welltower, which had made MOB investments topping $2 billion YTD through the end of Q3, last week announced that in recent weeks it had entered into five separate definitive agreements to acquire MOBs for a combined total of $1.67 billion.

Welltower’s pending acquisitions, for which it has entered definitive agreements, includes a $787 million purchase of 29 “Class A” MOBs from Milwaukee-based Hammes Partners. In addition, the REIT announced that it is “under contract” to make four other, separate MOB transactions totaling $885 million.

Those purchases, if they close as predicted by the end of year, would bring Welltower’s total 2019 MOB acquisitions to more than $3.5 billion.

Welltower’s deals alone, should they indeed close by the end of the year, would bring the MOB sector’s overall volume for the year, when added to the $7 billion-plus recorded in the first three quarters, to nearly $9 billion and provide a virtual lock that 2019’s volume will exceed $10 billion once again.

 

Source: HREI

Wellness Is Critical In Healthcare Investment

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Wellness is the biggest trend rocking the healthcare investment market today. It has become essential to bending the cost curve down, according to healthcare investor and developer Meridian’s John Pollock, and players in the product type should focus on wellness as a means of managing population health.

“Wellness is critical to help bend the cost curve down. Providers and payors have to embrace this mindset and focus on managing the health of the population,” Pollock, CEO of Meridian, tells GlobeSt.com in a recent interview about market trends. “I recently caught up with Ken Gorman, Founder and CEO of Power Wellness. It is clear that focusing on population health vis-a-vi wellness centers is trend that should continue and aligns with Meridian’s mission to help ‘bend the cost curve.’”

Wellness centers have evolved tremendously, and insurance companies are catching on the importance of these services.

“These centers have evolved over the years from small retail-based outlets that were referral only to what Ken calls “Gen 3 Wellness Centers” serve upwards of 6,000 community members and integrated into clinical care pathways,” says Pollock. “Payors are finally realizing that wellness is less expensive than treating chronic conditions and should be reimbursable under Medicare Advantage, most Accountable Care Organization and/or risk-based contracts.”

This is an important trend for both experienced and new players to not. The healthcare market has seen substantial increase in the capital players.

“There has been a lot of entrants into the healthcare real estate space over the past few years, particularly in the value-add space, and it is disconcerting,” says Pollock. “Often new operators don’t truly understand the dynamics of medical office and are at risk because the space is nuanced, users are very particular, and the correct tenant ecosystem is critical to an asset’s success.”

This has also pushed healthcare operators into outlying markets, and as a result, healthcare is expanding in nearly every metro across the country.

“With so much competition in the primary markets, some of my colleagues are seeing opportunities in secondary and tertiary markets where yields can be 100-150 bps higher than in primary markets for similar lease terms and credit profiles,” says Pollock. “At Meridian, for our investment business, we continue to focus on primary markets and look for the opportunities that others don’t see. We believe our unique lens allows us to see opportunities that leverage our core competencies that include entitlement prowess, a seasoned project management bench, intense asset management and access to flexible capital.”

 

Source: GlobeSt.