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Cambridge-Based BioLabs Selects Dallas Site For Central U.S. Hub

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Dallas-Fort Worth‘s 23-acre Pegasus Park office campus is the future landing site for life sciences firm BioLabs’ central U.S. hub.

Cambridge, Massachusetts-based BioLabs plans to open BioLabs at Pegasus Park inside the under-development Pegasus Park campus. The future tenant also plans to occupy private lab and office space at the site.

The redeveloped Pegasus Park near Stemmons Freeway in Dallas (PHOTO CREDIT: Small Investments, Lydia Hill Philanthropies and GFF)

Pegasus Park is the brainchild of J. Small Investments and Lyda Hill Philanthropies, which partnered to transform a former ExxonMobil office campus into a mixed-use development with specialty hubs and office sites dedicated to life sciences, biotech and philanthropic tenants.

To date, CoStar Group has identified 188 sites in DFW dedicated to life sciences tenants, with over 15,000 employees.

“The largest tenant so far is Alcon Laboratories, which occupies 1.6M SF at 6201 South Freeway in Fort Worth. Other DFW life and medical sciences tenants include Stryker, Abbott Labs and Pfizer,” CoStar Group Director of Market Analytics Paul Hendershot said. “With a rich history of technology and innovation, Dallas-Fort Worth is in a strong position to grow its already robust life sciences industry cluster.”

Still under development, the new life sciences campus sits off Stemmons Freeway between Southwestern Medical District and the Dallas Design District. J. Small Investments acquired the campus in 2015 from ExxonMobil and intends to convert the site into a mixed-use development offering 550K SF of office space, with a biotech hub featuring 37K SF of lab and training space.

“BioLabs is one of the biggest names in the biotech startup industry. Their decision to choose Dallas as their first location in the central U.S. is significant for our city, region and state,” CEO of LH Capital Inc. and Lyda Hill Philanthropies Nicole Small said in a statement.

 

Source: Bisnow

Medical Office Building Sales Fell Nearly 50 Percent In Q2, But The Sector’s Outlook Is Strong

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The volume of MOB investment sales transactions in the second quarter of 2020 totaled around $2.2 billion, a 43 percent decrease compared to a year ago. In the first quarter of 2020, MOB investment sales volume reached $3.7 billion, according to data firm Real Capital Analytics (RCA).

The CoStar Group, another provider of commercial real estate data, pegs MOB investment sales volume at around $2.1 billion in the second quarter, a drop of 54 percent from $4.7 billion from a year ago.

“The volume of sales has absolutely hit pause, it hit the brakes really hard in the second quarter. You saw a significant drop in sales volume,” says Keith Pierce, research manager for Southeastern region with real estate services firm Transwestern. “The price per square foot did not really shift that much for those sales that did close. But by and large, just everybody froze in late March and largely stayed frozen until sometime in June.”

Average cap rates on transactions involving MOB assets remained at 6.6 percent at the end of the second quarter, flat with the figure from a year ago and the first quarter of 2020, according to RCA. CoStar pegs average MOB cap rates at 6.7 percent, also registering no change from the previous quarter.

“I anticipate seeing somewhat of a flattening,” says Russell Brenner, president of the medical office and life sciences division with real estate investment firm CA. “Once the market truly opens up again and lenders, which have been very selective in where they lend, come back into the market in droves and in a more significant way, I think you may well see cap rates continue to fall. But for probably the next two three quarters, I think it will be a largely flattening of cap rates.”

Earlier during the pandemic, many Americans largely postponed elective procedures, which put a dent on revenues for medical office tenants. But in states where those facilities are reopening, industry sources are reporting pent-up demand.

“We saw very few delinquencies, perhaps a handful of rent deferral requests, but by and large, the healthcare medical office tenancy as a whole stood up very well,” says Brenner. “Certainly now that elective procedures are back on in most parts of the country, MOBs are poised to bounce back and will continue to be a stable and reliable asset class.”

“Medical practices are running at 90 to 95 percent of pre-pandemic levels,” says Steve Hall, senior managing director for healthcare advisory services at Transwestern, who expects this level of demand to continue through the end of the year.

“Many of the company’s tenants are back to 80 percent of pre-pandemic levels of procedures and services,” says Jon Boley, senior vice president of acquisitions and development for HSA PrimeCare, a firm that develops, leases and manages medical facilities.

“The reason these businesses are not back to 100 percent is because they are having to do above-standard cleaning in order to disinfect surgery centers throughout the day,” Hall notes. “A factor that will shore up MOB assets in the future is the dearth of new construction happening right now. During a pandemic, a lot of people aren’t pulling the trigger on a brand new construction. The lack of construction going on right now I think is really going to keep the market strong since there is not going to be oversupply.”

 

Source: HREI

Healthcare Construction Boom In North Texas: 79% Of New Dallas-Fort Worth Hospitals Landed In Denton And Collin Counties

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With a population of 7 million-plus, including aging baby boomers and young families moving in daily, North Texas is seeing unabated healthcare construction and investment activity, including seven new hospitals topping 800K SF in just the last year.

Medical facilities in the North Dallas suburbs and facilities centered around outpatient services remain the most prized commodities as the Metroplex tries to meet the area’s growing healthcare needs.

“In particular what is going on right now, in addition to the remarkable growth pattern, I think there is a lot of competition among healthcare providers,” Turner Construction Co. Director Steve Whitcraft said.

Whitcraft will be speaking on this topic at Bisnow’s The Future of Dallas Healthcare Real Estate conference Sept. 19.

“You have very strong providers in this market that are all very capable, differentiating themselves to best compete for those family services and also trying to get further out into the community. I think you are going to see more specialty facilities like heart and cancer centers and more satellite-type facilities with unique strengths to growing local neighborhoods,” Whitcraft said.

It is the growing North Dallas suburbs in particular where providers are setting up clinics and hospitals at a healthy pace.

“As the population continues to grow in the area of Collin County — it reached a population of a million this year  — healthcare facilities are expanding to the Planos, the Friscos, the Prospers and the Denton areas where we are seeing a lot of this growth,” McCarthy Building Cos. Vice President of Operations for the Dallas Business Unit Nate Kowallis said.

In fact, counties north of Dallas dominate CoStar’s list of healthcare projects and hospitals under construction.

“Since 2018, the region has added seven hospitals totaling 804K SF of new space,” CoStar Group’s Paul Hendershot said. “Seventy-nine percent is found in Collin and Denton counties, reflecting the high levels of growth in the northern suburbs.”

Healthcare projects under construction in the North Dallas suburbs include Texas Health Hospital Frisco, a collaboration between Texas Health Resources and UT Southwestern Medical Center; Cook Children’s Medical Center in Prosper, Denton County; and a new patient care tower for Texas Health Presbyterian Hospital Allen in Collin County, according to CoStar data.

Dallas-based pediatric hospital Children’s Health acquired a 72-acre parcel at U.S. Highway 380 and the Dallas North Tollway in Prosper earlier this year to construct a medical campus to serve children in the North Dallas suburbs.

Midlothian, a growing South Dallas suburb, has two medical facilities under construction, including Methodist Health System, a 190K SF full-service acute care hospital, CoStar data shows.

Dallas County also remains in play with the McCarthy | Crowther joint venture constructing The Parkland Outpatient Clinic 2 building, a ground-up, six-story clinic on the Parkland Health & Hospital System’s Dallas campus. The HKS-designed project will host a 540K SF breast cancer clinic.

Outpatient Care Maintains A Healthy Pulse

In DFW Despite some of those large projects underway, DFW healthcare investment and construction activity is focused less on larger hospital settings and more on smaller footprints designed to reach residents in DFW submarkets.

“Health systems and providers are increasingly focused on the delivery of care in lower-cost outpatient settings, and convenience for the consumer is of critical importance,” JLL’s Healthcare Capital Markets Group Managing Director Brian Bacharach said. “As DFW continues to expand, there will be increasing demand for outpatient facilities located within the growing communities.”

Even in the investment side of the space, outpatient services remains a primary focus of investors.

“The majority of third-party investment activity has been outpatient-focused, but there is virtually no speculative development in the space,” Bacharach said.

McCarthy’s Kowallis said he is seeing more construction activity in healthcare today focused on smaller facilities outside of major hospitals.

“There’s been a little bit of [construction] growth year over year, but mostly that has been with the medical office buildings, the clinics and the special care facilities,” Kowallis said. “That’s the big trend that we’ve seen, the shift from hospitals to more clinical or outpatient facilities.”

 

Source: Bisnow