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Medical Office Stays Strong In Major Healthcare Metros: 16% More Space Projected In Next Decade

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Driven by an aging US population, the amount of medical office space needed in the next decade is projected to be 16% more than today based on current trends, according to a report by CoStar.

That’s greater than the combined medical office space in New York, Los Angeles, Chicago and Dallas–Fort Worth, the nation’s four largest medical office markets.

This 22,654-square-foot medical office building is located at 9500 North Central Expressway.

Following this healthcare growth pattern, a 22,654-square-foot medical office building located at 9500 North Central Expressway currently houses DaVita Central Dallas Dialysis. Robert Lynn Investments recently purchased the asset and has a new long-term agreement with a national surgical company to anchor the building.

Robert Lynn Investments will develop the new space and expects it to be operational in the first quarter of 2020. The investment division of NAI Robert Lynn was opportunistic in purchasing the off-market value-add opportunity, which is consistent with its portfolio strategy.

NAI Robert Lynn brokers Nick Lee and Justin Utay sourced the building purchase and presented it to Robert Hoodis, Robert Lynn Investments managing partner. Lee and Utay also handled lease negotiations with the new tenant.

“This was a highly collaborative venture between Robert Lynn Investments and NAI Robert Lynn that enabled us to customize a solution to truly meet the client’s needs,” said Hoodis. “As an investment company, we benefit tremendously by accessing NAI Robert Lynn’s brokers’ submarket expertise. It’s a relationship that not only helps us source off-market deals, but often negotiate them to a better outcome for our clients and tenants. In this case, our team of Robert Lynn Investments and NAI Robert Lynn discovered a desirable new location that enables us to better serve our client with great benefits.”

The building spans 22,654 square feet, with the new tenant space to take up approximately 12,037 square feet. The remaining usable space, approximately 8,200 square feet, is occupied by DaVita.

The building includes covered parking for patients and is optimized for patient flow. The location is a short distance from Texas Health Presbyterian Hospital, numerous medical offices and major highways.

“The 9500 N. Central project fits perfectly within Robert Lynn Investment’s portfolio strategy, which includes medical office buildings, surgical hospitals and surgery centers throughout the country,” Hoodis tells GlobeSt.com. “While we have built our portfolio primarily through acquisition, we have seen a recent increase in development opportunities. We consider the 9500 N. Central property a hybrid opportunity as an acquisition that includes a significant development component. The scope of this project requires us to take shell space and develop it into a full surgery center. In addition to 9500, we are currently working on several development projects, including the expansion of an existing surgery center and a large ground-up medical office project.”

 

Source: GlobeSt.

Dallas-Fort Worth Tops The Nation In Medical Office Building Development

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Dallas-Fort Worth (DFW) had the nation’s highest rate of medical office building (MOB) completions from Q3 2017 to Q2 2018, according to a new report from CBRE.

MOB construction deliveries totaled 954K SF during that period, with another 95K SF of medical space still under construction as of the last half of 2018.mob

“Even development that robust doesn’t add up to overbuilding, at least not yet,” according to CBRE Senior Vice President, Global Workplace Solutions Jordan Buis. “Although we’ve seen growth in DFW healthcare developments over the past decade, I believe the market is stable. We’ve seen healthy demand from tenants to keep up with the new supply, and developers aren’t overbuilding. The population boom in DFW is driving the need for new medical product, especially in the suburbs.”

The recent volume of deliveries continues a longer-term pattern of growth for the Metroplex, the report said. From Q1 2010 to Q2 2018, DFW delivered more than 2.7M SF of new medical office space, second only to the Houston market, which delivered in excess of 3.5M SF of MOB space in the same period.  Medical office rents in the Metroplex increased 2.1% from Q2 2017 to Q2 2018 to $27.43/SF, even as the vacancy rate rose 180 basis points to 23.3% over the same period.

“As rents continue to rise and reimbursements continue to decline for the healthcare providers, it will be interesting to see if there’s a point of inflection in the near future,” Buis said.

The surge of MOB development in the Metroplex comes as health systems nationally are increasingly turning to outpatient centers due to higher capital costs and a surge in high-deductible health plans requiring patients to pay larger out-of-pocket amounts.

The total number of outpatient centers nationwide grew more than 50% from 2005 to 2016 to about 41,000 properties, according to CBRE. Outpatient center employment has more than doubled since 2003, and grew 3.5% year over year in October 2018, compared with 2% annual growth in overall healthcare employment.

Medical City Frisco Expansion (PHOTO CREDIT: Medical City Frisco)

In DFW, the most recent example of outpatient development — though close to a traditional hospital — just broke ground at Medical City Frisco.   The facility will be a medical office building with an ambulatory surgery center totaling about 150K SF and connected to Medical City‘s main hospital by a skybridge. The development will include 11 operating rooms, 53 patient rooms and office space. The $37M project is expected to be complete by spring 2020,”

“The development is anticipating future demand for leading-edge medical treatment,” Medical City CEO Charles Gressle said in a statement.

Last year, the hospital expanded its women’s services unit, which includes 13 delivery and recovery rooms, and features a six-bed, Level II neonatal intensive care unit with three dedicated cesarean section operating rooms.

 

Source: Bisnow