Tech is Changing How Medical Space is Used

Krotts: “Physicians have realized that they can work around the fixed monthly cost of real estate by creating innovative ways to share work spaces, to be more efficient with the space they have, or to integrate technology to help them do all of the above.”

NEWPORT BEACH, CA—Today’s technology allows specialists in two different areas to share the same space and highlight different amenities appropriate to their patients—but that’s not all, Real Estate Development Associates ‘ CEO Jason Krotts tells GlobeSt.com. The firm is currently under construction on the Newport Heights Medical Campus , which will comprise two class-A medical-office buildings totaling 64,000 square feet here. Bryan McKenney of CypressWest Partners , the listing broker on the property, tells us at the end of Q1, the MOB vacancy rate in Newport Beach was 4.7%—a really tight market, especially considering that the vast majority of the MOB product is so old. He adds that more than 75% of the current MOB product was built before 1990 and is lacking the technology and flexibility for today’s medical practices (e.g., surgery centers, general practices, radiology centers, etc.) We spoke exclusively with Krotts about the new campus and its technological features, what it will provide for doctors and the community and how technology is changing the way doctors choose to use their space. GlobeSt.com: What will the Newport Heights Medical Campus provide to both doctors and the greater Newport Beach community? Krotts: The Newport Heights Medical Campus fulfills a growing need for new medical-office space to meet a heightened demand for patient care in Newport Beach. Besides Hoag Health Center , there hasn’t been a new project with significant space to handle new practices, new practice types and new business modalities in more than 20 years. From our experience, physicians don’t want to invest money into a building that is already showing its age. With our project, they have the security of knowing that this will be a great place to practice medicine for the next 20 years because they get to start with something that is brand new. Thus far, we have had a significant level of interest in the project and are close to executing leases for nearly 45% of the project.

Newport Heights Medical Campus is currently nearly 45% leased and construction has just begun.

GlobeSt.com: How is the growing trend in the use of technology affecting the way that doctors want to use their new space? Krotts: The days of chart rooms and big rolling file cabinets are over. Patient records are now stored on a server or in the cloud and are accessible via an iPad or computer. Everything is synched across platforms and updated in real time. A patient can check in at the reception desk on an iPad , and their data is instantly sent to the examination room. Things are becoming more efficient and streamlined, and the reduction in human touch points is reducing human error. This is particularly true for practices with multiple locations. Technology is also changing the way we create and use medical office space. Consider two doctor friends: One is a dermatologist and the other a plastic surgeon, and they keep office hours on separate days of the week. Today’s technology lets them share the same space. The waiting room TV can be switched to display content appropriate to whichever doctor is on duty that day, patient data is kept private but accessible via different computer logins—even the artwork can be changed digitally to match each’s practitioner’s style. GlobeSt.com: What are MOB tenants looking for in a space? Krotts: Because of the current limited availability of quality medical-office space, physicians in the area are constrained in their ability to grow and deliver care the way they want to. These people don’t need just another exam room—they need thousands of square feet for a new service line, or to bring multiple practices together under one roof to create natural cross-referral patterns and practice synergy. Physicians have realized that they can work around the fixed monthly cost of real estate by creating innovative ways to share work spaces, to be more efficient with the space they have, or to integrate technology to help them do all of the above. GlobeSt.com: What else should our readers know about the use of MOB space? Krotts: As an investment , MOB is one of the most recession-resistant real estate classes that exists. That’s due to a number of factors including the tendency for doctors to stay in one place because of insurance requirements and the potential to lose patients when they relocate, as well as the tremendous demand in the market today for medical-office space based in part on our aging population and the expansion of health-insurance coverage under the Patient Protection and Affordable Care Act . Currently, there is an MOB base totaling 1.3 million square feet in the greater Newport Beach/Costa Mesa area. At the end of 2014, MOB vacancies here were at 4%–the lowest in the country. The barriers to add new medical space here are high due to a lack of available land that has proper zoning for medical. On a broader scale, there is a decentralization trend away from the traditional hospital campus to provide better care and convenience to the patient. Outpatient and satellite centers are trending upward, and Newport Heights Medical Campus offers a strategic location for a larger medical operator trying to break into the coastal market. With developers leveraging development and redevelopment opportunities across all property types, how can you capitalize on this activity?  Join us  at RealShare Orange County on August 16^th for impactful information from the leaders in Orange County CRE. Learn  more .