HC Real Estate – 13 Rumblings in 2012

Posted on May 14, 2012

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Two weeks ago, I attended the annual BOMA Medical Office Building conference, and still I am trying to digest what I heard—not all of which was of a consistent message.  The conference was a mix of points-of-view on real estate, finance, healthcare and design topics.

Here is a baker’s dozen of things I heard that best encapsulate today’s challenges:

  1. Healthcare systems:  ‘What do we have, and are we using it in the best possible way?’
  2. Monetizing a hospital’s latent real estate value can be shrewd because it is often undervalued on the balance sheet…however, most hospitals still consider alternatives to outright real estate ownership a last resort.
  3. Hospitals should work with only the strongest (financially-strong, strong ownership, low risk profile) development and project partners
  4. Medical office buildings (MOBs) are a growing sub-market…but some consider MOBs, along with long-term acute care (LTAC) and rehabilitation hospitals, suspect investments.
  5. Retail clinic success is very market dependent, and is not the threat originally expected
  6. Some hospitals continue to off-load non-essential services from the core campus…yet, some of those hospitals struggle with decentralized operations and managing a growing, disparate real estate portfolio
  7. Data should be driving most strategic decisions at the departmental level and above
  8. There will be a lot more “repurposing” of space in the near future
  9. To operate with true efficiency, hospitals will become 24-7
  10. IT investments are utilizing larger-than-expected amounts of capital from the balance sheet
  11. More consolidation within healthcare is needed,will happen, and will lead to larger systems…but larger systems have an increasingly difficult time with the capital budgeting process.
  12. Healthcare providers continue to gobble up physician practices and house them in MOBs…yet hospitals loathe being the landlord for their physicians.
  13. In the past six months, investors in healthcare real estate (mutual funds, private equity, REITs) have received huge cash infusions, and are struggling to find worthy vehicles in which to invest.

Some of these topics need to be explored further, yet this is a good highlight of the conference and the most intriguing observations helping to shape the healthcare market in the near term.

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