What Is Making The MOB Segment So Healthy?

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Since 2012, annual revenues from the pharmaceutical industry have increased from nearly $200 billion to almost $300 billion in 2018. In the same period, single-tenant medical office transactions jumped from almost $1.5 billion in 2012 to $2.5 billion last year.

What is causing the significant increase in single-tenant medical office transactions along with the robust health-care market?

The simple answer is an aging population. There is no question that America is getting older. According to the United States Census Bureau, the number of Americans 65 years and older is expected to double over the next three decades. An aging population requires more drugs, more health-care professionals and  more space to deliver medical services. For investors in net lease properties, the medical office sector can provide a strong investment opportunity to ride this seemingly unstoppable trend.

First, the space is more accessible to a wider group of investors with an average transaction size of nearly $10 million in 2018 vs. over $20 million for the rest of the single-tenant office sector.

Secondly, medical office is commanding higher per-square-foot valuations than the net lease office sector overall, with buyers paying a 7 percent premium per square foot over non-medical assets. This reflects the robust demand and healthy market fundamentals, as investors can take comfort in owning a solidly performing medical office property that commands a strong valuation.

In an investor survey recently conducted by JLL, respondents’ interest in office assets leased to health-care-related tenants outpaced that of technology, business services, government and financial services. Investors who are targeting the health-care space in 2019 indicated they are allocating on average 20 percent of their capital towards medical office assets.

Additionally, apart from industrial assets, investors indicated that the health-care sector was the most likely to exhibit a decrease in cap rates in the remainder of the year. This, along with the other factors previously mentioned, has attracted a diversified and evenly distributed buyer population. Institutional and private investors as well as REITs have been putting money into this property type, which indicates the depth of investor interest across the spectrum of buyers. Broad investor interest and increased demand is expected to continue to put owners in a strong position to sell their investments at attractive valuations in the future.

Finally, the asset class on average commands lower cap rates than the rest of the single-tenant office space, due to the mission criticality of the real estate. Its cap rate is reflective of its dependable stream of income. On average, medical cap rates are 30 basis points lower than those in the office sector overall.

As net lease investors navigate the uncertainty of the retail sector, the medical office space appears poised to offer an alternative, with strong, dependable returns that are more difficult to disrupt with technology and the internet. As long-term trends in health care continue to point toward longer lifespans and increased care, medical office space will remain critical and demand will increase, providing opportunities for investors to capitalize on this unstoppable force: growing old.

 

Source: Commercial Property Executive

Designing Healthcare Spaces To Be More Inclusive

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Humanizing healthcare environments can improve both patient and staff wellbeing and is an essential consideration in the design of healthcare spaces.

Often, though, hospital designs might cater to the needs of patients but overlook the need for a safe and rejuvenating workplace that serves its staff too.

A research report on the topic of Design Matters for Nurses: Hospital Design For Nurse Attraction And Retention (HASSELL with University of Melbourne, May 2016) states:

“Aesthetics and maintenance of a workplace serve as a daily reminder of the value their employees place on their work. Nurses have identified a number of environmental qualities that affect their daily work experience, including temperature, noise, odor and color, but the main factors were access to natural light and maintenance.”

The report also notes that nurses often complain about the general lack of space away from patient work.

“The underestimated value of staff may be more significant than hospital management perceives, commented Michaela Sheahan, senior design researcher at HASSELL in a recent comment piece for Indesign magazine. “But this can be rectified with a renewed focus on the hospital as a workplace, as well as a place to treat patients.”

For instance, creating comfortable areas for meal breaks could provide relief from the high-intensity work that hospital staff members have to face every day. Outdoor dining areas for staff members can bring about a sense of enjoyment around mealtimes, creating a substantial distinction between work and break areas.

Dedicated spaces for documentation tasks with proper ergonomic support could help reduce strain and fatigue. Even the inclusion of large windows that bring in natural lighting could help impact patient healing and staff wellbeing.

Another emerging trend is using biophilic design principles to craft a more soothing indoor experience. Think improved ventilation, acoustic comfort, enhanced natural lighting, external natural views and the use of natural materials, patterns and colours.

By humanizing healthcare spaces through biophilia there is potential to empower patients, aid recovery, reduce stress and improve the emotional wellbeing of staff, in turn creating a more helpful, healing environment.

A timely example is the Royal Adelaide Hospital, designed by Silver Thomas Hanley in a joint venture with DesignInc. Planned around landscaped courtyards, the hospital has been conceptualized as a park within a hospital.

Perhaps it is worth exploring the idea of design that caters to both the patient and members of staff within a healthcare facility. It is, after all, in a healthcare organization’s best interests to have a happy and healthy team who love coming in to work and are fully invested in their duties.

 

Source: Architecture & Design

This Will Impact Florida Healthcare For Years To Come

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Advancements in technology, changes in legislation and the expansion of ambulatory care are changing the face of healthcare across the U.S.

Florida’s healthcare industry is experiencing a major shift as real estate prices rise and proposals for new facilities continue to pop up since the elimination of the Certificate of Need rules. Healthcare industry leaders will discuss these issues at Bisnow’s upcoming South Florida Healthcare Real Estate Event on Aug. 8.

As of July 1, Florida healthcare facilities are no longer required to obtain a Certificate of Need from the state before beginning construction. Jackson Health System Chief Operating Officer and Executive Vice President Don Steigman says he has already seen the impact on construction.

“There has already been a plethora of planned expansion in the ambulatory arena,” Steigman said. “Hospitals, physician practice groups and other healthcare providers have begun placing a greater emphasis on the outpatient side of care, giving communities access to free-standing emergency rooms, urgent care centers and group practices.”

Bisnow spoke to Steigman to learn more about what this change means for the future of healthcare in Florida and to get a preview of what he will be speaking about at Bisnow’s South Florida Healthcare Real Estate event.

Bisnow: Why is Bisnow’s upcoming South Florida Healthcare Real Estate event so important to you and what will you be speaking about?

Don Steigman: Since the elimination of the Certificate of Need rules, hospitals can be opened in Florida without the state having to approve the need for new hospitals. These healthcare facilities will still go through a licensing process, but they won’t have to prove that there’s a need in a community to build a facility.  This is a huge change that will impact the landscape of healthcare real estate in Florida for years to come.

Bisnow: Can you tell me a bit about what you do at Jackson Health System?

Steigman: I’m the chief operating officer for Jackson Health System. I’m responsible for the day-to-day operations of our hospitals, support services and ambulatory services, including our outpatient facilities and urgent care centers. Additionally, I’m responsible for the strategic growth of our operations.

Bisnow: What is the most pressing issue currently impacting healthcare real estate in South Florida?

Steigman: Right now, I believe it’s the challenges that come with aligning the real estate values in South Florida with the income that will be produced by these new healthcare enterprises. There are tremendous economic pressures placed on healthcare facilities and these pressures, combined with rising real estate value in South Florida, are limiting the feasibility of some proposed new healthcare projects.  On a more positive note, the healthcare real estate market is growing throughout all of Florida and I believe there will be many opportunities for new ambulatory healthcare facilities to open in cities across the state.

Bisnow: Outside of your work, what are you most passionate about?

Steigman: When I’m not working, I enjoy reading, running and going on hikes. I’m also on the board of my local chapter of The Liver Foundation.

 

Source: Bisnow