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Encouraging Signs For MOB Development

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Since the onset of the COVID-19 pandemic, most health systems have been forced to put most their efforts into surviving the crisis, leaving little time to think about growing their ambulatory networks and initiating new medical office building (MOB) development projects.

In recent weeks, however, with the opening up of non-elective surgeries in most states, there are reports that this could be changing.

According to Ben Ochs, CEO and managing partner of one of the healthcare real estate (HRE) sector’s most-active development firms in recent years, Media, Pa.-based Anchor Health Properties, requests for proposals (RFPs) from the health systems are starting to resurface.

“Instead of actively pursuing development deals with health systems during the throes of the pandemic and knocking on their doors, Anchor has been, for the most part, waiting for the health systems to be the initiators,” Ochs noted. “That said, we have seen a number of system-sponsored RFPs come out … and I think at last count we’re in the middle of responding to about four, right now, which I think is a very positive sign.”

Mr. Ochs was one of three panelists to take part in a June 10 HRE webinar titled, “State of the Industry: What’s the Outlook for 2020 from an Investment, Development and Leasing/Operations Perspective?”

The two-part online event, sponsored by Atlanta-based InterFace Conference Group, began with a panel discussion on investment. That was followed by a session on development that featured Mr. Ochs, along with Mark Davis of longtime Minneapolis-based HRE development firm Davis, and Chad Henderson of Pensacola, Fla.-based Catalyst Healthcare Real Estate (HRE). HREI™ Publisher Murray W. Wolf moderated the development discussion.

 

Source: HREI

Investors Expect Big Second Half: MOB Buyers Discuss State Of Market During InterFace Webinar

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After the initial shock of the fallout of the COVID-19 pandemic, it looks as if the healthcare industry, and subsequently the healthcare real estate (HRE) sector, is getting back on track.

“We collected 96 percent of our rents (in April), but the providers and our tenants were really scared,” said Chip Conk, CEO and founder of Nashville, Tenn.-based Montecito Medical Real Estate, which has a portfolio of about 3 million square feet of medical office space under management. “They didn’t know anything about what was really going to happen. However, by last week, we have seen from our tenants, I think, a little bit of stabilization in terms of where they are psychologically, and we actually had some requests that got totally paid back. Overall, the sector, at least our tenants, seems to be stable … COVID could come back, but overall we’re feeling a lot better than we were 90 days ago, as a company.”

As a result of such stability in the HRE sector, demand and pricing remain quite strong for medical office buildings (MOBs), according to panelists who took part in a June 10 webinar exploring how the sector is faring during the pandemic.

Sponsored by Atlanta-based Interface Conference Group, part of France Media Inc., the event was titled, “State of the Industry: What’s the Outlook for 2020 from an Investment, Development and Leasing/Operations Perspective?”

In addition to Mr. Conk, the discussion, moderated by Mindy Berman, senior managing director and an MOB sales broker with Jones Lang LaSalle Inc. (NYSE: JLL), also included: Robert Hull, executive VP with Nashville-based Healthcare Realty Trust (NYSE: HR); and Peter Westmeyer, president and managing principal with Chicago-based MBRE Healthcare.

As noted, the strength of the MOB sector amid the fallout from the pandemic has kept the product type on the radar screens of many investors, according to the panelists, whose firms are among those that have remained as active as possible in the market.

 

Source: HREI

COVID-19 Will Accelerate Property Repurposing

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In many ways, COVID-19 is accelerating transitions that had already been occurring in the commercial real estate world.

“People think we should open up the economy sooner,” says Newmeyer Dillion partner Mike Krueger. “But I don’t think anybody’s saying that this isn’t going away anytime soon.”

Ultimately, Krueger predicts that COVID-19 will force “some very creative repurposing of properties.”

“We’re going to see very creative developers come in and repurpose those properties for their next use,” Krueger says. “At this stage, we don’t even know what the best use of some properties will be.”

Krueger says that is already happening in malls. In some places, they’re being repurposed by medical organizations.

“You may have a J.C. Penney’s in a huge building that could be perfect for an oncology department or maybe perfect for outpatient medical treatment,” Krueger says. “The rest of the stores might still be vacant, but that one building is great for that a medical use.”

Malls may have other advantages for conversion to other uses. For instance, a large mall will be ADA compliant.

“It’s going to have elevators and escalators,” Krueger says “Maybe an abandoned mall is a perfect opportunity to put a nursing home or some assisted living facility because you already have all these access points.”

Malls, which are also near public transit and bus lines, would also provide plenty of space to create completely independent units that are not on central air, if ventilation is a concern, according to Krueger.

“I think we’re still waiting on a lot of guidance,” Krueger says. “The insurance companies are really going to be the ones that are going to dictate this.”

But malls are just one example of how COVID-19 could change spaces.

“We are now looking at a complete revolution in what retail and commercial spaces are going to look like, especially in the restaurant industry,” Krueger says. “Depending on where you are, you’re going to have different counties with different restrictions. At least in the Bay area, we know that the post-COVID-19 restaurant experience is not going to be the same as pre-COVID-19, namely and the occupancy space.”

Offices are another place ripe for change. While teleworking had been growing steadily as a trend for a while, Newmeyer Dillion partner Mike Krueger thinks the news that Twitter is allowing its employees to work remotely indefinitely will spark discussions at a lot of large firms in The Bay Area.

“For large tech companies that are renting out giant spaces in downtown San Francisco or anywhere in the Bay area, anywhere where commercial real estate is very expensive,” Krueger says. “Now, all of a sudden, you see some of the most visible tech companies out there saying, ‘We don’t even need our commercial space.’ I think you’re going to see a significant change around what that space is going to be useful and how that space is being used.”

 

Source: GlobeSt.