Medical Office Building Investors Will Be Chasing Deals In 2020

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As we prepare to swing into the new year, the outlook for the medical office sector is good…largely.

Underpinning the market, as it always has, is the continual aging of the population and the increased medical services that come along with it.

But, despite this sure-bet demand, the sector is not without its challenges, as Al Pontius, SVP and national director of Marcus & Millichap’s Office and Industrial divisions, makes clear. Those concerns arise as a result of the massive industry trend toward consolidation and the move on the part of many formerly independent care providers to saddle up with national care brands.

The firm’s second-half Medical Office Buildings Report defines the growth of the merger movement:

“Hospital and health-system merger activity continues to transform the medical office sector, driving a reduction in physician-owned practices in recent years. In 2012, nearly half of locations were physician-owned practices, but in 2018, just 31 percent were owned by doctors.”

And therein lie the concerns for the existing stock of medical office buildings (MOB).

“There’s a lot of older-vintage product that’s not located where the health systems want to be,” says Pontius. “Some assets may not accommodate the desired configuration of services that the major health systems see as appropriate, modern enough or technologically supportive enough. Consequently, there are a number of buildings that will under-perform relative to newer properties in the sector as well as other asset classes.”

But while there might be assets that sit on the sidelines as healthcare needs grow, few investors, be they institutional or private, are doing the same.

“The consolidation has supported investor sentiment as major providers create efficiencies and broaden service coverage,” says the report. “A sizable pipeline of new space and major expansions by high-credit tenants will sustain elevated investment activity through the end of this year.”

 

Source: GlobeSt.

Wellington Regional Medical Center Acquires Additional 35 Acres For Future Medical Campus

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Wellington Regional Medical Center has acquired 35 additional acres in Westlake from Minto Communities for the future development of a medical campus. The transaction closed November 25. Terms were not disclosed.

The land is adjacent to a five-acre parcel on which the hospital built a freestanding emergency medical facility that opened to patients in April 2019. The ER at Westlake, located at 16750 Persimmon Boulevard, provides emergency medical care 24-hours a day, seven days a week with eight exam rooms, three rapid medical exam bays, one triage room, on-site lab services and on-site radiological services.

Wellington Regional’s parent company, Universal Health Services (UHS), had an option to acquire the 35 acres when it closed on the land for the emergency room facility early in 2018.

“Due to the early success of the ER at Westlake, we decided to exercise our option and move forward with purchasing the additional land,” said Pam Tahan, CEO, Wellington Regional Medical Center. “The City of Westlake is growing faster than expected and we want to be prepared to meet Westlake’s and the surrounding community’s health care needs as more people move into the area.”

Wellington Regional said it’s too early to determine how the land will be developed, but city zoning rules allow for medical-related uses such as a pharmacy, diagnostic testing, urgent care facility and an acute care hospital.

“We commend Wellington Regional for having the vision to start planning now to meet the future demand for medical services in this part of Palm Beach County,” said John Carter, vice president of Minto Communities USA. “At the rate Westlake is growing, there will be a big need for robust and quality health care services in the area sooner rather than later.”

Minto has sold over 420 single-family homes since opening Westlake in October 2017, beating expectations. Recently, the master-developer/builder started selling Phase 2 of its second neighborhood, The Meadows, priced from the low $300s. Minto’s first neighborhood, The Hammocks, is near sell out. That sales velocity has propelled the City of Westlake to become the fastest growing city in Florida according to U.S. Census figures.

The 3,800-acre Westlake community is approved for 4,500 homes and more than 2-million square feet of commercial space.

In June 2019, Minto opened the first phase of its $15 million amenities center. The Westlake Adventure Park includes a resort-style lagoon pool with water slide, a kids’ interactive splash pad, and poolside concessions. An expansive recreational lawn features a covered concert pavilion and grassy area for events, along with shade pavilions, grills and picnic area, BMX pump park, playground and bocce ball courts. Phase 2 will include basketball courts and adult lap pool.

Commercial development in Westlake is also well under way. Most recently, the City approved a 91-acre private college preparatory school and sports academy with the first phase of construction set to begin in January of 2020. Adjacent to the school, Christ Fellowship Church has submitted plans to build a new 13-acre campus as it grows its ministry throughout Palm Beach County. FPL is finishing up construction on a new 400-acre solar energy center, while Palm Beach County will soon open a new fire station and district headquarters just off Seminole Pratt Whitney Road. A new 7-11 gas station and convenience store is set to start construction in 2020.

Westlake is located at 16610 Town Center Parkway North in the City of Westlake, on Seminole Pratt Whitney Road between Southern Blvd. and Northlake Blvd.

 

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.