Retailers’ loss is turning out to be healthcare’s gain. Amid store closures and the shuttering of some big-box retailers, medical and healthcare-related offices are seeing new opportunities.
“Healthcare is definitely the new retail,” CBRE Senior Vice President Bryan Lewitt said at Bisnow’s Big West Coast Healthcare event on June 15. “The retail people at our company tell us about 25% of retail will go away.”
As some stores are going into crisis mode, healthcare is starting to fill the gap. “Retail centers are really dying and withering on the vine, yet you’ve got healthcare systems moving into retail centers because there seems to be a growing demand for the accessibility,” Allen Matkins partner and panel moderator Fernando Villa said. There are challenges that keep the model from working in some locations. Beverly Hills does not allow developers to convert retail to medicine, according to Lewitt. The City of Beverly Hills adopted an ordinance six years ago, which went into effect on Feb. 11, 2011, putting a moratorium on developing and converting general office or retail space to medical regardless of having the necessary parking, he said.
Retailers love when healthcare is in the mix because all of the people coming through the building and dropping off patients will go shop, according to Pacific Medical Buildings Senior Vice President Jake Rohe. “It’s a really logical mix,” Rohe said. “I don’t know why we didn’t think about it a while back, but it makes a lot of sense.” It also comes in handy since it can be expensive to buy land in California and sometimes more expensive to build, according to Rohe. “We need to find solutions to help drive down healthcare costs,” Meridian Property Co. CEO John Pollock said. “These dying sort of retail centers are perfect examples of where we can do it.” He said there is not a client who does not want that convenience to enhance the patient experience. He said companies often have to overcome the legislative or city bureaucracy to get them approved. “It’s a challenge, but it’s where the future is,” Pollock said.
It feels like the trend is here to stay, Pollock said. “I think retailization is in many ways a response to the demand for convenience,” Children’s Hospital of LA Chief Strategy Officer Lara Khouri said. Families do not want to have to travel two hours to get to a medical appointment, she said. She said Southern California, in particular, poses challenges to getting around given the size of the area. She said access and parking are important. Khouri also expects technology, including telemedicine, will offer increased ways for medical professionals to connect with families.
While many retailers welcome the increased foot traffic a medical office can bring to a center, some have pushed back. A Walgreens or CVS Pharmacy may be interested in seeing a clinic come in, but other times they may have their own mini-clinic space inside the stores and not want the competition, Cox, Castle & Nicholson partner Andrew Fogg said. Patients may appreciate the convenience of a retail location, but stores may either see it as a complement or competition.
Arizona entrepreneur John Groberg is putting a new twist on the relatively old concept of timeshare space for medical tenants, and one medical office broker in Arizona says Groberg’s idea may have momentum.
Groberg is setting up a medical office space called Viva MedSuites in Scottsdale, a Phoenix suburb. He describes it as part medical timeshare/part medical co-working space (similar to Regus in the office sector).
The 3,000-sq.-ft. Viva MedSuites facility, set to open June 15, is aimed at medical professionals such as internal medicine specialists, dermatologists, nurse practitioners and psychiatrists who are seeking flexible space without being shackled by a long-term agreement.
Viva MedSuites will feature 10 exam rooms, a patient waiting room, bathrooms, a tenant break room and an assistant’s room Tenants will pay $85 a day or $50 a half-day per exam room. This set-up will allow a medical practitioner to add a satellite location, for instance, or test a new market area, according to Groberg.
Under Viva MedSuites’ timeshare-co-working hybrid, “I don’t have just ‘pay a monthly fee and show up whenever you want’ type access, like some more modern executive suite operators have,” he says.
Here’s how the Viva MedSuites model works:
When a tenant signs up, he or she picks a day or days of the week to occupy the space, and then has access to designated rooms only during that period. For example, a doctor might sign up for a full day on Mondays and Wednesdays and a half-day on Fridays. The doctor then would be charged weekly rent based on two full days and one-half day.
“There may be one or a few rooms that would be available to them on those days, and their access card would only work for them on those days and for those rooms,” Groberg says. “They would be responsible for scheduling their appointments on those days, and they will be charged for the space on those days whether they use it or not. But they will be guaranteed that on those days, they will have an appropriate exam room available to them.”
Unlike medical timeshares, Viva MedSuites doesn’t require a long-term lease. A medical professional can cancel a contract at Viva MedSuites with just 12 weeks’ notice.
Historically, the medical office industry has catered to medical practices willing to rent at least 2,000 sq. ft. through long-term leases, according to Groberg. There was a dearth of options for small-scale practitioners needing less space.
“Usually, it means they either have to overcommit to space and then try to sublease out their unneeded space, or they have to sublease someone else’s unneeded space. Both of those situations create many unwanted distractions and challenges to both parties in the transaction,” Groberg says.
Groberg says he’s already lined up six or seven clients who are ready to rent space at Viva MedSuites, with interest expressed by more than 10 other prospective tenants.
Under the Viva MedSuites model, a medical professional is freed from the hassles of being a landlord, such as fixing internet connections and ordering office supplies, notes Michael Morton, principal of Medical Office Brokers in Scottsdale. From the tenant’s perspective, the Viva MedSuites model doesn’t force a medical professional to pay monthly rent when space is being occupied just a few days a week, he says.
“If the operator can make it profitable, it’s a win for all,” Morton says.
As for investors, a hybrid space like Viva MedSuites stands a better chance of making money than a traditional medical timeshare, in Morton’s view. Why? Because few occupants of traditional timeshares end up graduating to bigger spaces.
“Some landlords provide these spaces to attract tenants to eventually lease permanent space,” Morton says. “It doesn’t usually happen, though.”
Viva MedSuites is coming on-line at a time when the medical office sector is seeing weaker demand in the Phoenix area.
In the first quarter of 2017, the vacancy rate for medical office space in the Phoenix market averaged 16.0 percent, according to a report from Colliers International. That was up from 15.7 percent during the first quarter of 2016. Meanwhile, asking rents for medical office space were $22.66 per sq. ft. in the first quarter, up 160 basis points from the same period a year earlier, the report notes.
Colliers researchers write that following seven straight years of vacancy declines and against the backdrop of uncertainty over federal healthcare policies, the vacancy rate in Phoenix’s medical office market will likely go up by as much as 100 basis points in 2017.
“While tenant demand for space is forecast to remain fairly strong, this year is forecast to mark the most new construction since 2009, and the projects that are being delivered are spec developments,” Colliers report notes.
As Viva MedSuites competes for medical tenants in the Phoenix market, both Groberg and Morton say it should appeal to younger medical professionals, thanks to its co-working component.
“The old-school docs historically have a hard time with adapting to different operational methods and mingling personalities,” Morton says. “However, I believe the younger docs are more open-minded about office scenarios.”
Groberg says he’s been working with two other types of co-working spaces—executive suites and salon suites—since 2001. Through those experiences, he saw an unmet need for a co-working or space-sharing concept in the medical office sector. He views Viva MedSuite’s timeshare-co-working combination as an emerging category in the medical office sector.
“I’m not aware of many other types of space like what we are doing — that’s not to say there aren’t any,” he says.
Morton doesn’t think Viva MedSuites is a “groundbreaking” model, but he does think it has a place in the medical office market.
If the first Viva MedSuites performs well, Groberg says he’ll consider opening other locations in the Phoenix area.
After recently opening its expanded emergency room, Aventura Hospital & Medical Center will seek city approval for even bigger growth with new patient beds and a parking garage.
On June 14, the city commission was scheduled to vote on the proposal by the hospital, which is owned by HCA Corp. (NYSE: HCA). It has requested a larger setback from the street, increased density and less open space in order to accommodate its site plan.
The 407-bed Aventura Hospital & Medical Center is located on the 19.7-acre site at 20900 Biscayne Blvd. It recently completed a $75.6 million emergency department expansion with 22 new rooms. The hospital was designated a Level II trauma center last year.
Aventura Hospital’s new expansion plan calls for a three-story building of 86,900 square feet for patient care plus a 506-space parking garage. The patient care building would be on the east side of the existing south tower and feature 60 patient rooms, waiting rooms and a lounge.
During construction of the building in what is now a parking lot, the hospital would lease off-site parking for its employees and provide them with shuttle service until the new parking garage is done, according to the application.
The patient tower was designed by is Earl Swensson Associates in Nashville, Tennessee and the parking garage was designed by R.R. Simmons in Tampa.
An official from HCA couldn’t immediately be reached for comment.
“The proposed improvements will enable the hospital to expand its services and continue to provide outstanding health benefits to Aventura residents and the surrounding communities,” Shutts & Bowen attorney Alexander I. Tachmes, stated in the hospital’s application to the city. “The addition will provide additional beds that need to be connected to the main hospital building on the east campus to provide efficient patient care and maximize the use of resources, including services, equipment and staff. It will also enhance patient comfort, safety and security by allowing easy access between departments without forcing patients to leave the building.”
While wanting to be healthy is nothing new, the way health and wellness are managed has evolved considerably. Patient-centered care with a more personalized focus on treatment of the whole person is resulting in improved patient outcomes and increased staff effectiveness and morale. This also helps administrators meet key safety goals, reduce costs, and increase market share.
As an example, UT Southwestern Medical Center opened its radiation oncology center in early April. The William P. Clements Jr. University Hospital Radiation Oncology Building—part of the Harold C. Simmons Comprehensive Cancer Center and an outpatient clinic of William P. Clements Jr. University Hospital—is a three-story, 63,000-square-foot structure and the largest individual facility for radiation oncology in North Texas. Perkins+Will’s Dallas office provided master planning, architectural design, interior design and furniture, fixtures, and equipment services.
Intended to foster well-being, enhance comfort and safety in a patient-centered care system, the design streamlines workflow, adapts to technology and change, supports sustainability, and enables treatment accuracy through advancing technologies. In addition, the layout creates an environment of flexible spaces that accommodate the care teams with fewer walls and more shared spaces, improving productivity while facilitating focus, collaboration, and organized work.
Located on an elevated site offering views north to the UTSW campus, the expressive architecture pays homage to the consistent academic architecture of the existing campus while blending high-tech, comfort, technology, and warmth, satisfying both academia and patient expectations alike. The user experience is accented with warm interior materials, consistent daylighting and intentional views, and access to exterior gardens. Patients and staff alike can find solace, collaboration and comfort seamlessly throughout the facility.
Likewise, Baylor Scott & White Health—the largest not-for-profit health care system in Texas—together with the Dallas Cowboys, broke ground in 2016 on a game-changing facility that is located at The Star in Frisco, home of the new Dallas Cowboys World Headquarters.
Slated for completion in early 2018 and named Baylor Scott & White Sports Therapy & Research at The Star, the 300,000 square-foot campus is expected to become a nationally recognized model for the holistic treatment of physically active individuals, aimed to harness the best techniques in injury prevention, performance, recovery, education, and research. It is also a first-of-its kind collaboration between an NFL team, a health system, and a school district (Frisco Independent School District). Perkins+Will is leading the design of the sports performance, research, and wellness center.
The nine-story building will be a showcase of health and wellness on the 91-acre campus. In addition to outpatient physical therapy and rehabilitation, sports psychology and a brain injury program, sports nutrition, orthopedics, cardiology, surgery, urgent care, medical office space, and a pharmacy, the facility will house a street-level Sports Performance Center powered by Fusionetics that features an indoor/outdoor playing field, basketball court, and training, research, and rehabilitation areas. It will also have an imaging center developed in collaboration with General Electric (GE).
The design invokes a sense of strength, durability and precision—attributes of both the athletes who will seek treatment there and the sports physicians who will provide care there. The glass and metal building is designed to give patients clear views and easy access to the outdoors, as well as provide views to the activity within for the campus community.
Lastly, in a plan to provide the appropriate mix of diagnostic and treatment services, the University Health System of San Antonio approved design and planning for the construction of a new trauma tower at University Hospital. The Perkins+Will design, in conjunction with Garza/Bomberger & Associates and RVK Architects, included larger patient rooms and plenty of natural light. Design of the interior spaces and functional layout moves staff and patients in an efficient manner. The new hospital is twice as big as the old one.
Architecture does, indeed, affect emotional state. Patient-centered healing environments should facilitate compassionate and dignified human interactions, enhance comfort, and create spaces where families and friends of the patient are considered part of the care team. In doing so, this becomes the convergence of doing what is most cost effective with what is best for all parties involved.
The William “Bill” Kling Veterans Clinic in Sunrise just sold for $49.7 million to an affiliate of the Scottsdale, Arizona-based, publicly-traded real estate investment firm Healthcare Trust of America, records show.
The property at 9800 West Commercial Boulevard stretches 9.3 acres with a 110,714-square-foot building built between 2008 and 2009. The Heathcare Trust Delaware affiliate, HTA-VA Sunrise Mob, LLC, paid $449 per square foot for the building.
Indianapolis-based commercial real estate company Duke Realty was the seller. Records show Duke Realty bought the clinic for $36.3 million, or $328 per square foot, in 2012.
The veterans clinic is near the anticipated community project Metropica that the Sunrise commission approved last year. The project will have 370,000 square feet of retail space, a 345-unit apartment building, and the rights to a 240-room hotel and 140,000 square feet of Class A office space, in west Broward. One of its first of eight residential towers, Metropica One, scored a $65 million construction loan, last month.
Source: The Real Deal
Various health systems nationwide are embracing the “retail opportunity,” allowing restaurants, pharmacies and clothiers to lease ample space within their hospitals and outpatient buildings.
That’s the case at Chicago-based Northwestern Memorial HealthCare, according to Gina Weldy, vice president of operations and real estate at the health system. But Northwestern’s approach may strike some other systems as odd, given that Northwestern also leases space to “unhealthy” places, like donut shops.
Northwestern is a seven-hospital health system located in the Chicagoland area. The health system currently has more than 100 outpatient sites and about 70,000 square feet of retail space—all of which looks similarly to how “a normal retail environment might look,” Weldy said.
Usually, Northwestern leases to “fresh, healthy concepts,” Weldy explained—but not always. And the strategy has worked out marvelously for the health system.
In general it’s been incredibly successful,” Weldy said during a panel discussion at BOMA International’s recent 2017 Medical Office Buildings and Healthcare Real Estate Conference in Denver. “We have seen the return that we anticipated.”
Respite and Amenitites
When originally deciding how to approach retail, Northwestern had a lot to consider.
“We had a lot of really rigorous conversations about what we could align with, and what would be successful,” Weldy explained.
The health system wanted its retail tenants to provide a respite for hospital patients, but also “an important amenity for [hospital] employees, who may only have 30 minutes at lunch to get things done,” Weldy said.
Luckily, convincing retail partners to come on board wasn’t very difficult, as Northwestern’s downtown Chicago campus offers them the density of midtown Manhattan.
“While you may not perceive yourselves as being in a dense environment like we are, if you actually measure the density within your buildings, there’s a significant retail capture opportunity,” Weldy explained.
Northwestern knew that nobody really desires to go into a hospital to “have a retail experience,” so it cut doors in the outer walls of its buildings to lease to places like restaurants and a full-service Walgreen’s, Weldy added. This further helped Northwestern’s 5-block campus blend into the larger Chicago neighborhood.
“We helped the neighborhood forget our size,” Weldy said.
Employees reacted so well to the new retail spots that Northwestern ended up closing its “heavily subsidized” employee cafeteria at its downtown Chicago hospital and replaced it with four healthy restaurants.
Northwestern also leases space to a couple of donut shops, though leaders feel justified in this decision.
“If a family is going through chemotherapy with their 3-year-old, they don’t really care right now about the healthfulness of the food—they’re going to give the child whatever makes them comfortable that day,” Weldy said.
Source: Medical Office News
For years, hospitals and physician groups have proposed building a proton therapy center in Palm Beach County. Those plans never panned out, presumably because the cancer-treatment centers are prohibitively expensive.
But a plan for a proton therapy center at Tenet Healthcare’s Delray Medical Center remains on track. Proton International of Louisville, Kentucky, this month closed on an $81.3 million bond issue that will pay for the 40,000-square-foot facility, according to a mortgage.
The facility will be open for photon patients in 2018 and proton patients in 2019, Proton International said.
With proton therapy, doctors aim a high-speed stream of positively charged particles at a cancerous tumor. Unlike chemotherapy, which bombards a patient’s body with radiation, protons release more of their energy into the tumor and nowhere else, thus saving healthy tissue.
Seen as a safer alternative to chemotherapy, protons are used to treat tumors of the brain and central nervous system, spine, head and neck, lung, prostate, liver, gastrointestinal tract and colon, and some breast tumors. Because children are especially sensitive to radiation therapy, doctors often use protons to treat juvenile cancer.
In early 2012, Boca Raton Regional Hospital said it would spend $120 million to build a proton center on Glades Road. At the same time, South Florida Radiation Oncology was scouting locations for its own proton facility. Neither project was built.
Source: Palm Beach Post
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