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The Pandemic’s Impact On Health Care Design: Smaller, Flexible Spaces With Great Adaptability

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The pandemic rocked U.S. health care facilities in 2020, leaving them with falling revenue from moneymaking surgeries and ordinary care as physicians and nurses shifted their attention toward patients infected with the coronavirus.

But the real change will come three to four years from now, when the impact of new designs implemented on existing and new healthcare facilities are deployed based on what architects and physicians have learned over the past nine months.

“Health care clients are already shifting their focus and asking for smaller footprints and more space flexibility along with additional isolated, negative air pressure rooms,” said Architect and EYP principal Miranda Morgan, while speaking at Bisnow‘s ‘The Future of DFW Healthcare’ webinar. “The smaller footprints are just more efficient and lean. We are still providing everything that is needed, and we are still doing big huge patient towers. But instead of big luxury, patient rooms, clients are asking us to be closer to code and to get what you need in that space and provide the patient with a good experience, but don’t go overboard.”

A large focus of future design will be on keeping healthy and sick patients separate rather than feeding everyone through the same access points and maneuvering the same hallways. Luxurious common areas have lost some favor as health care systems shift toward making sure more rooms are available to isolate emergency care and hospital inpatients while also better managing various points of access to segregate healthy and sick populations on-site.

“We are examining the way patients flow through the facilities,” said Dwain Thiele, UT Southwestern Medical Centersenior associate dean. “Some of the most challenging are imaging facilities or places that previously did not have a large amount of space, hallways or waiting rooms. It is something we will be looking at in the future.”

“What we have seen through the pandemic from a needs standpoint is more access points for people to be seen and to have access whether through telehealth or smaller, faster clinics where people can get in and out,” Transwestern National Managing Director of Healthcare John Huff said. “I guess we realize we don’t all want to sit in a huge long waiting room for an hour.”

In the future, waiting rooms very well could be a thing of the past, with that square footage allocated to more isolated treatment rooms, health care experts said.

“Other trends here to stay include the ongoing push for more outpatient care centers and ambulatory facilities that can take care of non-life-threatening illnesses while hospitals are hit with pandemics,” Huff said.

“Technology also will play a significant role in reshaping the future of health care, with telemedicine, or remote health care visits, allowing hospitals to keep healthier patients away from pandemic-stricken areas,” Methodist Health System Chief Operating Officer Pamela Stoyanoffsaid. “I would say prior to COVID, we probably saw about 1% of visits in the outpatient setting with telehealth. In April and May, when we saw the first surge, we were probably up to 80% to 90% of our visits. When some of the restrictions lifted, telehealth usage dropped back down to 15%, but it’s expected to have a place in the future of health care services. It is now a massive part of what we do, and it is here to stay.”

 

Source: Bisnow

Cap Rates Rise In Single Tenant Medical Sector

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National asking cap rates in the single-tenant medical sector increased to 6.50%, according to The Boulder Group’s 2020 Net Lease Medical Report.That was a 5-basis point increase when compared to the prior year.

Non-investment grade tenanted properties made up 89% of the supply in the third quarter, explaining part of the increase. Investment-grade medical has a 5.93% cap rate.

“When COVID hit in Q2 and Q3, people snapped up almost all the investment-grade product that was out there and left the non-investment grade product,” says Randy Blankstein, president of The Boulder Group. “There was a flight to safety, and everyone understood that investment-grade medical was going to fare well during COVID. So there was a big rush into that space, leaving very little product today. And that’s why it looks like cap rates went up even though it’s not an apples-to-apples comparison.”

Even with much of the investment-grade medical properties taken off the market, the net lease medical sector saw a 6% uptick in transaction volume through the third quarter of 2020.

“The space is still good as far as being e-commerce resistant and an essential business,” Blankstein says. “People are still looking for this product and wanting to go a little bit more up the risk curve as far as some of the larger urgent care centers. But most investors are still not looking at the individual doctors and dentists and those types of offices. They’re not quite there yet on the credit spectrum.”

In Q3, net lease medical properties were priced at a 28-basis point discount to the overall net lease sector. Private and institutional investors continue to seek investment opportunities within the single-tenant medical sector, according to The Boulder Group.

Investment-grade medical tenants such as hospital backed systems and Fresenius typically generate lower cap rates due to the increased demand from private and 1031 investors. Private investors have widened their acquisition criteria to include urgent care groups as higher yields can be achieved.

Blankstein expects the single tenant net lease medical sector to remain active as investors are attracted to the healthcare sector’s long-term outlook and the increased need for conveniently located healthcare. The number of aging baby boomers, combined with the fact that medical space is e-commerce resistant, are a big part of this appeal.

“Between flu shots, COVID tests and COVID vaccines, there won’t be a shortage of this kind of space,” Blankstein says. “There is also a large ramping up of urgent cares as people realize there’s a huge cost savings between going to a hospital and going to an urgent care.”

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Source: GlobeSt.

Medical Office Building Developers See Opportunities And Expect Project Growth In 2021

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Although medical office buildings (MOBs) are once again showing their strength as an investment and ownership product during the COVID-19 pandemic, some professionals involved in the sector have expressed concern that there could be a slowdown in the development of such facilities in the next couple of years.

Although such a concern could indeed prove to be true, professionals with some of the MOB sector’s largest and best-known development firms, as well as full-service healthcare real estate HRE) firms that provide development services, recently expressed that they are remaining as busy as ever, and should be for at least the next year or longer.

HREI™ Editorial Advisory Board members say the number of requests for proposals (RFPs) and the level of development activity during the COVID-19 pandemic have come as a pleasant surprise, and they say they expect 2021 to be another strong year.

 

Source: HREi