Healthcare Needs Space, but Won’t Save Office

It would almost seem to be a match: various aspects of healthcare need commercial real estate space and office owners need more tenants. But far more often than not, it’s like the assumption that office buildings can become multifamily properties. A small percentage of the time that is possible — with significant expense to upgrade. Far more often, it just doesn’t work.

A recent report on the single-tenant net lease market from Northmarq makes it clear:

“Healthcare continues to be an important subset of single-tenant office — helping to buoy recent activity — but investor demand for urgent cares, dialysis facilities, medical office buildings, and other specialty healthcare properties isn’t likely to translate to traditional office product. There should be continued crossover into research/development of lab space — critical office facilities that ultimately support the medical office sector — but with the bulk of office inventory being housed in more traditional urban high-rises, suburban office parks, and campus-style headquarters, general office owners have a more challenging road ahead.”

Even medical office and life science needs vary significantly in ways that affect commercial real estate choices and development. Those fundamental differences express themselves through specifics of ideal locations, property and facilities requirements, HVAC needs, equipment, staffing, tenant sizes, revenue sources, longevity, support systems, and even parking.

Medical buildings are best situated close to hospitals. They need good placement near highly residential communities, with plenty of people passing by. Part of the retail aspect is what medical offices need to provide to attract and keep patients, including parking and easy physical access. Many doctors move to the suburbs because that’s where the growing populations are.

Life science real estate is similar in having to support specific needs of tenants that are in fields related to medical studies and care. As medical offices typically need proximity to hospitals, life science typically wants a location near a major university with a life science focus. Building requirements are exacting and specific to a firm and typically include 20% to 60% lab space, with complex HVAC to scrub air exchanges that might carry biohazards.

There can be crossover at times. Such companies as ShareMD Suites, Clinicube, and MedCoShare provide flex medical coworking spaces, which are like a cross between traditional medical offices and flex office. But even then, there has to be the facilities that any medical practice would need.

Still, this is a minority of times. Most office space won’t provide what practitioners and researchers need.