Healthcare Q Kentucky

Building, selling medical office buildings? Expect to be plenty busy

  
The KentuckyOne Health Flaget Memorial MOB in Bardstown, Kentucky, is an example of today’s modern healthcare space.

Developers specializing in medical office buildings should have plenty of work in the coming years, according to the latest research from CBRE.

CBRE recently released its 2017 medical office and health care report, and it contained plenty of good news for the developers and brokers who work in the healthcare sector.

CBRE said that the aging U.S. population, combined with pressure for healthcare providers to lower costs, mean that demand for medical office properties is on the rise. This will keep developers and brokers in this sector busy.

“The steep increase in the 65-plus population and anticipated greater need for in-office physician services by this group signals a continued increase in demand for healthcare services and medical office space in the years ahead,” said Andrea Cross,” head of office research for the Americas for CBRE, in a written statement.

The numbers back this up. The U.S. Census Bureau predicts that the U.S. population of residents 65 and older will almost double from 2015 through 2055. If this happens, there will be more than 92 million people in this age range by 2055, nearly 23 percent of the country’s population.

What’s most interesting is that the medical office sector is already a strong one, even without this increase in the older population. CBRE reports that the country’s medical office building vacancy rate stood at 8 percent in the first quarter of 2017. That is down nearly 300 basis points from the first quarter of 2010. It’s also significantly lower than the overall U.S. office market, which had a vacancy rate of 13 percent in the first quarter of this year.

And the vacancy rate in the medical office sector is falling at a faster pace than it has in the past. CBRE said that the national vacancy rate decreased by the same amount during the last nine quarters as it did during the previous four years.

Investors have noticed this strength. According to CBRE’s report, the total U.S. investment volume in medical office buildings of at least 10,000 square feet rose from just under $4 billion in 2010 to $10.2 billion in 2016.

It’s not just the aging population that is fueling this boom. Patients are demanding that healthcare providers reduce their costs. To meet this demand, providers are relocating services closer to where patients live. They are using video technology to meet with patients remotely and moving more medical services away from large, central hospitals, which cost more to operate, into lower-cost outpaitent facilities.

These lower-cost facilities, of course, include medical office buildings, along with urgent-care facilities. This trend, too, is a boon to the developers who are hired to build these facilities.

“The evolution of medical technologies is boosting demand for newer product with the infrastructure capable of handling cutting-edge devices and systems,” said Jim Hayden, executive managing director for healthcare, global workplace solutions with CBRE. “Medical office space that helps providers minimize costs and maximize outcomes, including buildings that support collaboration and can accommodate new technologies, will likely remain in favor.”

The takeaway here? Developers and brokers that want a steady stream of work would do well to operate in the healthcare and medical office space. This is one area that is definitely slated for more growth.