Medical Concierges, Telehealth, Experience Define Healthcare Real Estate’s Brand-New World

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Around the country, the ways consumers choose to access healthcare is undergoing a seismic shift. And those changes are affecting the locations health providers choose, the space they need and the ways they want to build it.

Patients across all demographics are leaning toward easily accessible, convenient healthcare systems and starting to warm to things like telehealth and digital offerings. Meanwhile, advances in technology are happening at a rapid clip, changing the way healthcare providers now practice medicine and casting uncertainty on how it will be done in the future.

“We really don’t know what these buildings are going to be and look like 10 years from now,” Gilbane Building Co. Vice President Peter Mulcahey said at Bisnow’s National Healthcare East event Wednesday.

“I think, if we all sat here 10 years ago and said, ‘Most of the medicine we want to deliver is through iPad interface and we only want to do critical services within four walls’ …. the reality hadn’t quite set in, otherwise we would have been prepared for where we are right now.”

Medical facility designers could be forgiven for their lack of foresight: The iPad was only announced eight years ago, and back then there were broad questions about whether Steve Jobs’ latest invention had any practical use at all.

As healthcare delivery evolves and more outpatient facilities are developed, Mulcahey said, there needs to be a focus on making sure structures are built to allow for flexibility down the road.

That may mean including more square footage in new or redesigned buildings, he said, to make way for repurposing as needed.

Others said changes to the way hospital services are provided are looming. Just as retail has morphed from physical stores to online, developments in technology will increasingly take healthcare into people’s homes.

“For those whose livelihoods depend on bricks-and-mortar of hospitals, sorry to disappoint you, but the hospital room of the future is likely to be the bedrooms of people across the country,” Partners Continuing Care and Spaulding Rehabilitation Network President David Storto said. “Imagine, for those of you who remember, [1970s TV doctor] Marcus Welby with all the technology that is available today.”

Panelists said treating patients remotely is fast becoming a key element to healthcare. Children’s National Health System in D.C. has been working in telemedicine for two decades, for example, and New York-Presbyterian is one of the largest telehealth providers in the country, according to Chief Strategy Officer Emme Deland.

Still, Deland said, even though telehealth is crucial to supporting patients, the healthcare industry needs to start preparing inpatient facilities for the aging population.

“We’ve done an analysis of what is going to happen over the next 10 years,” Deland told the audience. “If you take into consideration the technology and the population … We will see a slight decrease in the number of discharges, but we will see an increase in the number of patient days because people will be sicker and hospitalized. So we do need to have our inpatient facility [and] we do need to figure out our additional intensive care space.”

These changes are all playing out in healthcare providers’ search for locations, and the type of space they choose.

“You are seeing [a] greater number of practitioners in one space, more one-stop shops, so providing many services under one roof,” said broker Paul Wexler, the head of the Wexler Healthcare Properties Team at Corcoran, who added easy-to-access locations are in high demand.

He and his team recently arranged for a 17K SF outpatient center to go into a former movie theater at 1210 Second Ave. and for a 5K SF obstetrician and gynecologist clinic at 260 East 62nd St., he said.

“As much as retailers are trying to create that experience … healthcare providers are recognizing the same need to create the same experience,” he said. “Everything from the fast and efficient way they move people through the office to the overall experience of checking in and out.”

Mount Sinai Health Real Estate Division Vice President Tom Ahn agreed that type of one-stop shopping option — where you can see a primary care doctor, have blood drawn and get an MRI done in one place — is a major part of his hospital’s expansion.

Earlier this year, Mount Sinai announced a plan to build an 18K SF health center at 55 Hudson Yards, which will serve the companies with offices at the megaproject and the residents who live in the high-end condominiums and rentals there. Ahn said that location will be unique in that it will be a “concierge” health service, which is a path many providers are now taking.

Ultimately, he said, it is about standing out to patients and consumers.

“If we are not convenient and in a good location, providing all those services, we aren’t going to be competitive,” he said. “So that’s an important piece of our strategy, and that’s an important part of a lot of institutions’ strategy right now.”

While carving out that strategy, both in terms of location and service, in the shifting healthcare environment is imperative, panelists said patients will still seek out doctors and practitioners they feel they can trust.

“So [healthcare] is going to be less physical and more digital … A 25-year-old should be using 90% of his healthcare digitally… [for a] 45-year-old that will change, a 65-year-old will use 50% digital,” CityMD CEO Dr. Richard Park said. “AI, technology, that’s all important and needed. But humanity — that is the missing piece of healthcare.”

 

Source:  Bisnow

Healthcare REITs Signal An Increased Focus On Medical Office

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It is earnings season, which means real estate companies are diligently releasing their earnings and analysts are intently scrutinizing said reports. Mizuho REITs analyst Richard Anderson covers healthcare REITs and he noticed a trend among the big 3 companies HCP, Welltower and Ventas in their recent releases: they all are emphasizing strategies involving medical office buildings.

To be sure, MOB is a staple among their holdings but as Anderson tells GlobeSt.com, “it just seemed interesting that each of the three highlighted a very specific strategy aimed at approaching the medical office business to some degree, versus past earnings reports.”

He says that:

  • HCP made mention of its joint venture with Morgan Stanley that’s aimed at investing in medical office as well as a new partnership with HCA to focus on the asset class.
  • Welltower is expected to close about $500 million of MOB transactions in the short term. “Also, they have always talked about using their senior housing portfolio as a quasi hanging carrot for medical office, as a medical office feeder.” The REIT has also brought on board a former Duke Realty executive Keith Knokoli, who has strong credentials in the MOB segment. “You don’t make an investment at that level of executive if you’re not serious about the business.”
  • Ventas is re-igniting its exclusivity arrangement with PMB Real Estate Services. It is a medical office developer that Ventas inherited when it merged with Nationwide Health Properties many years ago, Anderson explains. Ventas just re-upped its exclusivity arrangement with the company for the next ten years, he says.

A Lower Risk Profile

What is strange, he says is that “cap rates on medical office assets that are trading hands are still quite low, but nonetheless REITs are maintaining a fair amount of attention toward the space.” Anderson also points out that medical office assets are known for their stability and relatively lackluster growth while skilled nursing is a higher returning asset class that comes with higher risk.

His tentative takeaway: there is possibly a return to risk-off mentality around the corner for healthcare REITs. “Maybe REITs are becoming buyers of medical offices simply because of their low risk orientation, even though the asset class remains quite expensive.”

 

Source:  GlobeSt.

Expansion in DNA Research Is Driving Strong Demand for Life Science Space in the United States

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A growing seniors population and increasing prevalence of high-cost diseases like diabetes has generated a surge in funding for healthcare research in recent years and, along with it, demand for life science-biotech lab space.

But the biggest impact on demand for wet lab space has resulted from mapping of the complete human genome and subsequent advances in biotechnology, according to Ian Anderson, director of research and analysis with real estate services firm CBRE. Anderson notes that the price for sequencing a human genome has dropped from $100,000 to just $1,000, resulting in massive expansion in DNA research and development of new biotech tools, like the CRISPR gene editing system.

“This ‘gold rush’ of information is providing the pharma industry the ability to tailor treatments to individuals and actually cure diseases, not just diagnose them and treat symptoms,” Anderson says.

As a result, lab space vacancy in the top three life science markets—Boston, the San Francisco Bay Area and San Diego—averaged between 4.0 and 6.0 percent at the end of 2017, the most recent period for which data is available, according a report from real estate services firm CBRE. In certain submarkets, including the Bay Area’s Peninsular and Emeryville/Berkley markets, Cambridge, Mass. and San Diego’s Torrey Pines, vacancy ranged between 0 and about 2.5 percent, respectively.

With ongoing high demand, vacancy and upward rent momentum have strengthen even further since the report was released, according to Anderson.

Tight vacancy is generating new construction in the San Francisco Bay Area and Boston-Cambridge markets, as well as growing life science markets, including Chicago and the Raleigh-Durham Research Triangle. San Diego is seeing significant new construction too, as well as redevelopment of office and industrial buildings for life science and biotech research and development.

These three markets have received the lion’s share funding from both the National Institutes of Health (NIH) and venture capital (VC) firms. According to the California Life Sciences Association, the state’s life science and biotech companies were awarded $3.8 billion in NIH grants in 2017 and attracted $6.7 billion in VC investment. The Massachusetts Biotechnology Council reported that Massachusetts life science and biotech companies were awarded $2.7 billion in NIH grants in 2017 and attracted $3.6 billion in VC investment.

“The life science sector is seeing record levels of IPO and funding activity,” says Greg Bisconti, Cushman & Wakefield executive director who heads the company’s life science practice nationally. A third quarter 2018 Cushman & Wakefield report notes that fundraising, IP, and merger and acquisition (M&A) activity are at an all-time, with Big Pharma playing a significant role in M&A and driving significant growth in all major biotech hubs.

The boom in funding has ratcheted up competition for talent and facilities, setting off a “war for talent” among life sciences companies, notes Bisconti.

“There’s a lot of hiring and organic growth of companies, but every company is limited by talent available,” he says. “When building and growing a life sciences company, key talent is being selective about the job opportunity and their future workplace, which highlights that companies need to secure quality space in which to grow talent.”

More patents are coming out of the New York life science cluster than San Francisco and Boston combined, according to John H. Cunningham, executive vice president and New York City regional market director at Alexandria Real Estate Equities. With both U.S. and European life science companies establishing beachheads in the city, Alexandria recently announced plans for expansion of the life science cluster, which is located on 3.5 acres in Manhattan’s Eastside Medical Corridor near New York University’s academic medical center and Bellevue Hospital. The company also acquired two nearby properties that will be redeveloped for its life science and biotech tenants.

The addition of the 550,000-sq.-ft. North Tower will bring total space at the Alexandria Center to approximately 1.3 million sq. ft. The building will provide collaborative space for scientists, as well as start-up space.

The company also acquired the 593,000-sq.-ft. Pfizer building at 219 East 42nd St. and a 177,000-sq.-ft. industrial building in Long Island City, both of which will be redeveloped. “We’re building an ecosystem that will allow growing companies to remain within our platform. People want to stay here with peers because it helps them grow and flourish,” says Cunningham.

CBRE’s Anderson notes that Los Angeles is producing a lot of STEM talent as well, and there is building momentum for a cluster around Harbor-UCLA Medical Center in the South Bay-Torrance area and life science and biotech companies located around UCLA and in the San Fernando Valley and Thousand Oaks areas. For now, however, many life science and biotech tenants want to be close to where collaboration and scientific breakthroughs are happening (San Francisco Bay Area, Boston-Cambridge or San Diego), Anderson notes.

 

Source:  NREI