Jerry Turner, vice president of the Minneapolis office of Jones Lang LaSalle, specializes in commercial health care real estate, a market that continues to thrive across Minnesota. Turner recently spoke with Minnesota Real Estate Journal about healthcare in the state, and why it’s been such a steady market for so long.
A strong market: This year has been really good for us in all of our markets. We recently completed the Parkview Regional Medical Center in Fort Wayne (Ind.), the Jamestown Regional Medical Center in North Dakota, a medical center in New York and another one in El Paso, Texas. Our healthcare platform, then, is performing well right now. We just had a ground-breaking for Detroit Medical Center’s new heart hospital, too.
Not all positive: There have been some delays, though. There have been a lot of projects that were keyed up for the first of the year or due to launch in April that have been pushed off for a lot of different reasons. We’d like to be optimistic and say that these projects will begin soon. I have no reason to believe that they won’t.
A wide range of projects: We are seeing a really neat variety of projects in this sector. On the lower end of the spectrum we are seeing some clinic conversions of retail strip centers into facilities for primary-care doctors. Other clients are building specialty clinics from the ground up, too. We are seeing a lot of orthopedics specialty centers with a focus on sports medicine. A lot of those are happening in our Cincinnati market. And contrary to what we had expected, we are seeing a lot of replacement hospital projects coming online. On the other side of things, we are seeing a lot of renovation projects, too, where clients are focusing on their rate-of-return opportunities. They are adding services that generate income for them.
Developer-led initiatives: We are also seeing a great deal of developer-led initiatives, most notably in Minneapolis. Developers are taking on a lot of the risk because some hospitals are strapped for cash. Their return-on-investment, their margins have shrunk a bit. They can’t pull the trigger on all these projects by themselves, so they need the developers to take on some more of the risk.
Antiquated facilities: In the Midwest, we are seeing many clients taking on antiquated facilities that are no longer serving their clients the way they need to. They are trying to position themselves in the market so that they can handle the increase in the volume of their patients.
Healthcare’s strength: A lot of what happens in the healthcare field is so technology driven. There are always new advances, new technology, new models of care. The health systems we are working with are always looking for new approaches to delivering better care. That is one of the main reasons why we are seeing such strong demand for new facilities and services. The other thing is that all these health systems are trying to maintain their market shares. It’s not all robust growth out there. Some of these systems are working just to maintain their status quo. To do that, they have to renovate old facilities, expand their buildings or build new free-standing care centers.