Commercial Investment Real Estate is the magazine of the CCIM Institute, the leading provider of commercial real estate education. CIRE covers market trends, current developments, and business strategies within the commercial real estate field.
Issue link: http://cire.epubxp.com/i/306204
planners use the term decanting to describe this fundamental shif in investment from the main hospital campus — typically an urban setting — to new locations in the suburbs. T is includes MOBs, cancer treatment centers, ambulatory surgery centers, diagnostic treatment centers, and rehabilitation facilities. From a real estate perspective, this is quite a change because the on-campus facilities were usually planned and developed by the hos- pital's internal staf without a lot of external resources other than architects and contractors. But as you go away from that model, the hospitals are smart enough to know that they need real estate advis- ers that are knowledgeable about land use trends, traf c patterns, infrastructure, land prices, and rental rates. What other trends are occurring? A more-competitive stance among the large healthcare systems: T is increased pace to the ambulatory model is being driven pri- marily by the need to be closer to the patient populations that health systems want to serve to increase market share. But it also improves patient convenience as these facilities are developed in more subur- ban areas that have better land availability. Another trend in the last several years is the use of third-party capital to build, f nance, and own these new facilities. Historically, the hospital industry relied upon cash, tax-exempt bond issues, or commercial debt to f nance facility investments. Today, with all of Sales of medical of ce buildings topped $6.7 billion in 2013, according to Real Capital Analytics, proof that this niche sector remains attractive to investors ranging from large institutional funds to the medical practice groups that buy their own facilities. Some experts in the f eld wonder if there will be enough product to meet investors' needs. Already capital- ization rates have reached a six-year low of 7.3 percent nationally, according to RCA data. And only 15 million sf of healthcare proper- ties have been developed since 2011, compared with 41 million sf in 2008 and 2009, according to Marcus & Millichap. But with the advent of the Af ordable Care Act, the rapidly chang- ing healthcare f eld is af ecting many of the factors surrounding MOB development — from location to size to investment funding. And it's happening faster than before, says Gregory P. Gheen, CCIM, one of the founding members and president of Realty Trust Group in Knoxville, Tenn., which has developed more than $220 million in healthcare projects across the U.S. With more than 24 years of health- care real estate experience, Gheen looks at current trends occurring in healthcare and MOB development. What is the biggest healthcare real estate trend today? Gregory P. Gheen, CCIM: Right now it's the recent acceleration of healthcare systems' investment in newer ambulatory facilities being developed of -campus versus on-campus projects. 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