Dallas-Fort Worth’s Booming Population Sparks An Opportunity For Build-To-Suit Developers

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While the country’s overall population growth may be slowing, people are flocking to Texas in droves.

The Lone Star State accounted for nearly one-fourth of the population growth in the U.S. between 2018 and 2019.. For Clay Curtis, this population boom means one thing: opportunity.

“It’s a great time for developers to pursue build-to-suit opportunities,” said Curtis, senior vice president at McRight-Smith Construction, a Texas-based construction management firm. “Millions of people are moving to the Dallas-Fort Worth area and they are all looking for services, from doctor’s offices and day cares to bars and coffee shops.”

Build-to-suit properties are designed in collaboration with the landowner to meet the needs of a specific tenant, such as a restaurant or medical facility. Curtis said that as a design-build firm, McRight-Smith has extensive experience working on projects that call for this level of collaboration and transparency.

Bisnow sat down with Curtis to learn more about what is happening in the Dallas-Fort Worth market and why he thinks now is the best time for developers to start searching for land to create their next build-to-suit project.

Bisnow: Where are you seeing CRE opportunity?

Curtis: I’ve seen significant CRE activity not just in the DFW metro area, but also in outlying areas beyond Plano, Frisco and Dallas. Specifically, in northern Collin County, the cities of Anna, Melissa and Prosper are experiencing tremendous growth in residential housing with the corresponding need for medical offices, small to large business offices, restaurants and other retail service businesses. Denton County is experiencing the same growth, particularly in the northern and western portions of the county.

Bisnow: Why do you believe now is the right time for developers to embrace build-to-suit opportunities?

Curtis: Retail occupancy rates in DFW are at 93%, near record highs. This trend has been going on for several years and we see no signs that it is softening. The areas we have identified in the northern sectors of both Collin and Denton counties are booming and we are seeing significant demand for medical office, general office and small to midsize retail space — exactly the types of projects built-to-suit was created for.  Couple this high demand with low availability and the opportunity is clear: Build-to-suit offers a wonderful opportunity to capitalize in this growing market.

Bisnow: What are some of the unique aspects of build-to-suit projects?

Curtis: What sets build-to-suit developments apart is that their specific advantages are shared by both the owner-developer and the tenant, allowing for a true win-win scenario. Since developers know exactly what the building will be used for, they can utilize the most modern, energy-efficient and cost-efficient systems to reduce a property’s operating and occupancy costs. For the tenant, build-to-suit provides an opportunity for direct input into the design and construction of the building, resulting in the most efficient use of the interior space. This helps keep the emphasis on the revenue-generating square footage and minimizes common areas, or back-office areas that can often feel oversized when trying to shoehorn a tenant into a larger space than they need.

Bisnow: What can design-build firms bring to these types of projects?

Curtis: Design-build companies like McRight-Smith manage the entire life cycle of a construction project, from the initial planning stages through ensuring that everything remains within budget and is delivered on time.  This approach offers owners, developers and future tenants a more direct line of communication during the construction process, without third-party intervention, which is key in build-to-suit projects. Our process is all about collaboration. It starts with a deep dive into the project goals, discussing tenant needs and building specifics with the design team, owner-developer and, in built-to-suit projects, the tenant.  The general design-build philosophy can be applied to any asset class. This process helps owners/developers, tenants and construction managers minimize cost, manage expectations, communicate effectively, stay on track of timelines and deliver the best outcomes.

 

Source: Bisnow

Group Seeking Medical Offices Spends $67M On Jacksonville Office Tower

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An Atlanta group scooped up a downtown Jacksonville tower for $67 million after seeing an opportunity where others saw a run-of-the-mill office asset.

ShareMD LLC, a medical property owner and operator, bought the 22-story 841 Prudential on the Baptist Medical Center campus from Chicago-based real estate investor GEM Realty Capital Inc.

841 Prudential was marketed as a traditional office asset for administrative users, but ShareMD — with help from The Easton Group brokerage arm Easton & Associates in Doral — saw the potential for clinical office uses.

“That was the value that we saw in the building. Everyone else was valuing it just as a professional office but we said, ‘Well, because of the proximity to Baptist and the geographic location, there is a unique opportunity to reposition the building to medical office to achieve higher rents and fill the vacancy,’ ” said Elliot LaBreche, The Easton Group vice president who represented ShareMD in the purchase.

LaBreche closed the transaction Feb. 20. CBRE Group Inc. represented seller GEM Realty.

“841 Prudential was nearly 80% occupied when sold with 15% of that already used by health care providers uses such as neurologists and pediatricians,” LaBreche said.

ShareMD wants to retrofit the vacant space concentrated on the lower floors to medical offices, meaning 35% of the building would become clinical space. If other vacancies open in the administrative space, ShareMD plans to reposition that space to increase the medical uses at 841 Prudential.

“While repositioning requires upfront spending, it’s expected to pay off later. Clinical offices command rents that are 10-15% more than traditional office rents,” LaBreche said.

ShareMD’s plans a $7 million investment to convert offices for clinical users. 841 Prudential has the advantage of undergoing a $6 million renovation two years ago. On the demand side, the Baptist campus faces natural growth constraints. It’s bound by the St. Johns River to the north and Interstate 95 and the Acosta Expressway on other sides. This leaves 841 Prudential well-positioned to absorb health-related growth.

“ We are talking to a very large orthopedics group that is affiliated with Baptist right now,” LaBreche said.

The larger Jacksonville medical office market is healthy with citywide occupancy slightly less than 95%, the highest nationally, according to Maryland-based medical office research company Revista.

The riverfront 841 Prudential has 500,000 square feet of leasable space on a 6.5-acre lot. It was built in 1955 as the city’s first skyscraper. Some of the larger tenants already are medical companies with administrative offices. They include Baptist, University of Florida Health and One Call, which connects injured workers with health care providers.

ShareMD is on a medical buying spree, spending $100 million in four months. The company is focusing on key markets such as Orlando, Tampa, Fort Lauderdale and Miami, where two purchases totaled $33 million. Its business model of building out clinical space benefits doctors as well as patients. ShareMD leases its clinical space short-term by the half-day, day, week or month, giving health care providers an opportunity to expand their geographic footprint and reach more patients.

“We are excited to be in South and North Florida and look forward to rounding out our Florida portfolio with additional assets over the coming months,” George Scopetta, president and managing partner of ShareMD, said in a news release. “With an aging baby boomer population, a burgeoning demand for health care services and insurance companies favoring outpatient care, we think the timing is perfect to execute our business plan in Florida. The opportunity is endless.”

 

Source: DBR

Healthcare Real Estate Developers Are Adapting To A Changing Landscape

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Anyone who has kept an eye on the healthcare real estate sector over the past several years is aware of the property type’s reliability amidst increasing economic uncertainty, which has resulted in growing interest among investors.

However, for what has become one of the hottest investment sectors in recent years, transformations underway within the healthcare industry will bring changes to the asset class over the next decade.

The market fundamentals are easy to understand. According to a recent report from Real Capital Analytics, United States-based healthcare real estate assets account for over $1 trillion in market value. Physician visits by baby boomers are expected to nearly double in the next decade; it is also projected that by 2060, one in four people will be over 65 years old. These factors make it clear that this already large market is positioned for continued growth.

However, in crowded regional healthcare markets like Philadelphia, which features several large competing healthcare systems and a variety of growing specialty networks, that growth will not just be more of the same.

Changes in Delivery

Traditionally, the American healthcare delivery model centered on hospitals, which meant that medical office buildings tended to be clustered near hospitals and other large inpatient medical facilities. These facilities were easy for doctors to access and provided enhanced services close to individuals’ primary points of care.

In recent years, the healthcare delivery model has undergone a dramatic shift, with outpatient and ambulatory facilities becoming primary points of care. This trend has unfolded almost simultaneously with the wave of consolidations and mergers that has swept through the industry in the last decade.

Working in tandem, these two trends have created a healthcare industry that is dominated by large healthcare systems searching for enhanced geographical footprints to better and more conveniently meet the health and wellness needs of the populations and communities they serve.

Key User Demands

Real estate plays a key role in a healthcare system’s ability to make quality care more accessible. As such, the demand for well-located, quality space continues to rise, attracting a greater number of investors than in prior years

Although location still plays a vital role in healthcare real estate investment, the criteria behind what makes a location desirable has shifted. Since medical buildings no longer need to be immediately proximate to hospitals, today’s best locations are those where people already are living, shopping and working. Whether this comes in the form of a purpose-built medical office building in the heart of a growing community or a retail location next to popular cafés and shopping destinations, today’s healthcare consumers prioritize convenience above all else.

Visibility is also playing a larger role in site selection for new healthcare projects. Expanding networks want their names out in the market, and they want people to be aware of their presence in the local community. This “retailization” of healthcare is highlighted by many medical office tenants’ requirements for signage and high visibility in their search for space.

Flexibility is also a main factor in today’s marketplace. Physician groups and healthcare systems require spaces that can accommodate the shifts in how care is delivered while also provide the flexibility to cater to telemedicine and other technologies that are transforming how people access care.

Project Example

Just outside of Philadelphia in Washington Township, New Jersey, the 35-acre Washington Square Town Center development addresses all of the factors discussed above.. With an increasingly cross-generational population and changing delivery model, medical space was a key component to the mixed-use project.

Working closely with Rothman Orthopaedic Institute, one of the region’s largest independent orthopaedic practices, a 40,000-square-foot, state-of-the-art medical office building was created at the gateway to the community that includes multifamily housing and retail options.

The healthcare trend has even been extended to the project’s residential component, with a 110-bed assisted living facility currently under construction to join the 330 residential apartments and 100 townhomes on the property. Today, the Rothman Medical Building stands fully occupied, and the retail component has seen tremendous interest from both medical and traditional retail tenants.

Not only do projects like the Washington Square Town Center allow the community to enjoy increased access to diverse medical services in a variety of settings, they also provide growing regional networks with a highly visible footprint in new communities to foster their continued growth.

Looking to the next decade, the healthcare real estate industry is positioned for tremendous growth. Leading this growth will be the developers and investors who truly understand the needs of an increasingly consolidated healthcare industry and can creatively imagine projects to meet both its short- and long-term needs.

 

Source: REBusiness Online