Medical Office Buildings Poised For Quick Recovery

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While hospitals and health-care facilities have been inundated by an influx of COVID-19 patients, many medical offices that offer non-emergency services have seen the opposite occur.

The property type’s solid fundamentals prior to the virus, however, promise a relatively rapid rebound when the economy is up and running again, according to Marcus & Millichap’s April special report on medical office buildings.

With many shelter-in-place orders in effect, communities across the U.S. are avoiding unnecessary travel and exposure, including those patients seeking elective surgeries or nonessential surgical and dental procedures. As patients decide to reschedule their appointments until further notice, many medical offices aren’t generating revenue and have had to partially, or fully, close.

The Post COVID-19 MOB Market

The COVID-19 pandemic has already left its mark on different facets of commercial real estate like office leasing, construction and retail. While the medical office building market was not spared, its strong market fundamentals prior to the emergence of the new coronavirus offer signs of a healthy market after the pandemic ends.

The national vacancy rate for medical office buildings was 90 basis points below the trailing 10-year-average of 9.7 percent, according to the report. The U.S. market also saw 6 million square feet of medical office space absorbed in 2019. Following demand, the below-average availability of medical offices has led to a steady stream of new properties, with deliveries hitting 10 million square feet. The statistics have attracted the attention of private investors looking for assets between $1 million and $10 million.

Once the COVID-19 pandemic is under control and the economy recovers, the medical office building market is expected to bounce back. The combination of an aging population, expanded medical insurance coverage and new treatment options equate to a growing demand for health care and the medical offices that come with it. Once the economy begins to return to normal, the backlog of work due to closed offices and rescheduled or canceled appointments will likely bring a sudden influx of work for medical-office staff.

And once the market returns to normalcy, the report noted that well-located assets with the infrastructure to handle modern medical needs will be in high demand. Specifically, medical office building demand may grow in non-urban markets as younger Millennials begin to move away from urban centers.

 

Source: Commercial Property Executive

Coronavirus Could Push Jacksonville Into Becoming A Life Science Cluster

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North Florida could benefit from future research related to the coronavirus.

Michael Brown, senior director for office services for Colliers International in Jacksonville, who is a life sciences CRE specialist, believes clusters will continue to develop around the University of Florida and Alachua and around the Mayo Clinic in Jacksonville.

“There are some very talented people in this region at the Mayo Clinic and the University of Florida, as well as some world-class contract manufacturing operations in Alachua,” Brown tells GlobeSt.com. “There will be companies seeking out their help, particularly in a time like this. I can also see other contract manufacturers and contract research groups giving North Florida serious consideration for expansion. Companies are being funded and good science is finding its way into labs. There are positive developments that offer promise. We are going to see a lot of push and pull. If this goes on for a much longer period of time than anyone hopes, I think there will be more detrimental issues and things that are unforeseen such as supply chains collapsing. But there is a silver lining out there as well. The science developed recently over the last two years has been way ahead of the innovation curve in terms of discovery. Manufacturing processes are getting better. The science itself, even if it is postponed or interrupted, will still be good science when it’s sitting on the shelf and not doing anything for a while.”

The country’s main life science clusters are well-established-Boston, San Francisco, San Diego and North Carolina’s Research Triangle—but there are secondary markets that are slowly gaining density and Brown asserts that Jacksonville has the foundation to become a small cluster. He cites land availability, transportation infrastructure and science coming out of the region’s universities.

“The academic underpinning is essential and it bodes well for Jacksonville,” Brown says.

Many challenges lie ahead, but Brown is optimistic that the life sciences sector in the US has the building blocks in place.

“My feeling is that when this does end, that ramping back up in pursuit of this science is going to be difficult and will require funding and new regulations, but it can be done and it’s not as though we’ve had companies out there failing in what they are pursuing,” Brown says. “I don’t want to say we will pick up right where we left off, but this particular industry will bounce back and it will bounce back with lessons learned along the way that will be very much process oriented.”

 

Source: GlobeSt

Health-Centered Communities May Start To Resonate In Coronavirus Era

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Health-centered communities, neighborhoods where millennials, baby boomers, technological advances, and new health care delivery models all converge, can be the blueprint of urban and suburban planning even in the age of COVID-19 and especially post-COVID-19, says Dennis Frenchman, Director of the MIT Center for Real Estate and the Class of 1922 Professor of Urban Design and Planning.

“Baby boomers are looking for convenient, affordable, aging-in-place health care options. Millennials, meanwhile, are pursuing physical environments that support their well-being and community-centric values,” Frenchman tells GlobeSt.com. “Our goal is to provide a blueprint for how to navigate these complex and profound demographic and cultural shifts taking shape throughout our society.”

Frenchman and his colleague, Stanley Shaw, plan on offering the course, Developing Health-Centered Communities: The Next Revolution.” in Real Estate in the Fall.

Baby boomers are aging and healthcare is foremost on their mind while most millennials are trying to lead healthy lifestyles by eating healthy foods and leading active social lives.

“These two generations are colliding in terms of health and wellness,” observes Frenchman.

Another plus to these communities for baby boomers how older buildings relate to their health.

“Living and working in an older, poorly ventilated building can negatively contribute to your health and longevity,” explains Frenchman. “If you have better quality air, sunlight and an overall healthy environment, landlords and developers can get premium rents.”

For these and other reasons, millennials are now suggesting their parents move to a health-centered community where parents can age in place instead of assisted-living facilities. As a result, the younger generation has more contact with the older generation, Frenchman says.

These communities tend to feature health centers in addition to the ubiquitous clubhouse. The developers also encourage walking around the community instead of driving everywhere. Instead of flattening hills, developers keep them intact to promote more exercise and movements.

“Health-centered communities also feature bike trails, social opportunities, horse stables and wellness programs,” says Frenchman. “Developers who offer these products will garner a lot of interest from all age groups.”

COVID-19

People are naturally social animals and the coronavirus has thrown a wrench in attending or hosting social events. In this age of social distancing however, healthy-centered communities can easily adapt to not interacting or engaging at any given time.

“Technology will solve some of the need but not necessarily all. However, it can work for a period of time,” explains Frenchman. “With digital technology, and in a health-centered community, patients are monitored remotely in their own environment. They can actually monitor their own oxygen, pollutants, carbon monoxide, etc. These tests are important for many reasons but it also shows you the physiological response of people as they live on their own environment.”

Frenchman believes these health-centered communities are simply a better way of living.

“There are less ER visits and less hospital stays,” says Frenchman. “Encouraging people to use their body and minds and overall just take care of themselves in this age of COVID-19 is always a good thing and it can also result in profits.”

 

Source: GlobeSt.