Healthcare Growth Pushes Medical Facilities to Adapt

Forest Park Medical Center in Austin was recently sold to St. David’s HealthCare.

AUSTIN, TX—With three of the fastest-growing counties in the nation—Bexar, Travis, and Williamson—the Central Texas region is adding new residents rapidly. In San Antonio and Austin, new residents are arriving at a rate of about 150 people per day, according to the US Census Bureau ‘s 2014–2015 data. These new neighbors mean a growing need for services such as healthcare, education and infrastructure, says CBRE Capital Markets’ Investment Properties–Texas Healthcare . Medical Office Building (MOB) trends in Central Texas mirror that of other major Texas healthcare markets where ballooning populations are driving hospital expansions into suburban areas and MOBs have rapidly evolving space requirements. When it comes to real estate, the Central Texas region is benefiting from hospital expansions and growing investor interest in healthcare and MOB assets. As the recession shifted investors’ focus, healthcare property types are no longer outliers, instead entering the medical arena as viable investment options due to increased rents and reliable cash flow that can now rival traditional office assets, says CBRE. With surging population growth and the evolving trend toward a consumer-driven healthcare model (for example, the expanding urgent care concept), construction and development of these related assets are bound to increase locational densities throughout office markets. Scott Herbold , first vice president, CBRE Capital Markets’ Investment Properties–Texas Healthcare, tells GlobeSt.com: “The business of providing healthcare services is rapidly changing from the pressures of consumers, federal and state legislation, and fiscal responsibility. Significant consolidation is occurring in the forms of acquisitions and affiliations. The most visible and tangible change to the consumer has been the proliferation of urgent care facilities, which can be affiliated with a hospital system or urgent care network or be independently owned.” Efforts are underway in both markets to improve the healthcare system and manage the demand changes for healthcare real estate. For example, decoupling healthcare services from medical centers allows patients to receive care closer to home. Urban sprawl is drawing hospital expansions to fast-growing residential areas while urgent care facilities and specialist providers are choosing retail centers because of ease of access. In Austin, communities such as Round Rock, TX and Cedar Park, TX have had medical office locations sprout up with convenient parking for outpatient services. Meanwhile, in an effort to reach more patients along the Interstate 35 corridor, CHRISTUS Santa Rosa Health System recently announced a second facility in San Marcos, TX, located about halfway between San Antonio and Austin. As major healthcare systems expand, the demand for on-campus and campus-adjacent MOBs (professional physician buildings leased for medical uses) and the importance of tracking these facilities for overall market reporting is on the rise. Herbold continues: “Another significant driver of healthcare facility construction is the result of hospital operators pushing their brand and facilities out to be more convenient to the consumer. Hospital-branded primary care clinics and fully licensed 24-hour emergency departments are offshoots of this trend. Providers are improving convenience by relocating or adding additional clinics closer to neighborhoods and areas with high densities of office buildings. It is easy to notice more physician practices in retail properties. Increased focus on preventative care and consumers’ desire for quick and convenient access to services near work or home are driving this trend. Typical practices seen in retail settings are primary care, pediatrics, allergists and dentists. Providers are merging to form larger, more efficient practices and they are sharing spaces with other providers, such as waiting rooms, check-ins, restrooms and business offices.” Changes in the regulatory environment have also created woes for small, privately owned providers. The Forest Park Medical brand located in high-income highly insured ZIP codes, often in or near mixed-use developments, was forced to close all of its locations after changes in insurance reimbursement rules. Without a doubt, the US healthcare landscape is changing. Demographic transformations, such as the aging baby boomers and the reluctance of millennials to visit traditional doctor’s offices, has resurrected the tradition of patient/doctor house calls. Patients today want options and healthcare providers are listening by examining new ways to use real estate and adopting MOBs for practicing dozens of specialties. Along with these changes, the emergence of MOBs as a commercial property sector is expected to grow quickly during the next 10 years.