Healthcare Real Estate Trends to Watch

Healthcare and Medical Center  Real Estate

Duke Realty owns and operates approximately 142 million rentable square feet of industrial and office assets, including medical office, in 18 major U.S. cities and their healthcare team offers planning, development, ownership and facility management services to hospitals and physician groups.  They recently posted an article listing their six healthcare real estate trends to watch in 2013 and they believe the “the healthcare industry and healthcare real estate have changed dramatically in the past several years.  Healthcare reform, the recession, lower reimbursements and other issues should continue to drive changes, including new uses of medical office space; creative, new partnerships; and an increase in monetization of outpatient facilities”.  The following trends are what Duke Realty expects hospitals and health systems should see in the coming years:

  • Higher-acuity care will increasingly move to medical office buildings (MOBS).
    • MOBs cost less to build, operate and maintain than hospitals.
    • These could improve consumer’s access to healthcare since they will be in suburban areas.
    • “Real estate implications:  These outpatient facilities will need to be designed to a higher, more sophisticated standard than typical MOBs”.
  • Freestanding emergency departments (FEDs) will be used in new ways.
    • According to Don Dunbar, Executive Vice President of Duke Realty, “More and more, we’re seeing for-profit ED companies competing for the 7/11, Walgreen’s and McDonald’s sites”.  Basically for-profit companies are targeting high-traffic, retail-orientated sites.
    • FEDs are not necessarily being created as the first step toward a future hospital campus.
  • Partnering will increase.
    • Partnering will increase so hospitals can broaden their range of services and improve quality of care.
    • Brand-companies will benefit by extending their brands into new markets.
    • “Real estate implications:  New, expanded or renovated “branded” facilities might need to accommodate these partnerships”.
  • The case for hospital-driven monetization will keep getting stronger.
    • Duke Realty says “there continues to be tremendous investor demand for MOBs and plenty of capital is available,[so] this could be the year…[for] an increase in hospital-driven monetization of MOBs”.
    • Money generated from monetization could help fund hospital mergers and acquisitions.
    • “Real estate implications:  More MOBS might be coming on the market”.
  • Repurposing will expand.
    • Offices, retail, industrial space and even grocery stores will be repurposed for medical use and become a prevalent healthcare strategy.
    • “Real estate implications:  There’s still plenty of potential new life for former retail and office buildings”.
  • Compliance will become even more vital.
    • Due to the healthcare reform that passed in 2010, “healthcare providers are now required to self-report to the Centers for Medicare & Medicaid Services (CMS) any violations” of the new legislative laws.  If providers don’t self-report, they could be fined, face prison or be forced to repay disqualified claims.
    • “Real estate implications:  More and more healthcare providers may decide to minimize their compliance risk by monetizing their MOBs”.