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The Pandemic’s Impact On Health Care Design: Smaller, Flexible Spaces With Great Adaptability

The pandemic rocked U.S. health care facilities in 2020, leaving them with falling revenue from moneymaking surgeries and ordinary care as physicians and nurses shifted their attention toward patients infected with the coronavirus.

But the real change will come three to four years from now, when the impact of new designs implemented on existing and new healthcare facilities are deployed based on what architects and physicians have learned over the past nine months.

“Health care clients are already shifting their focus and asking for smaller footprints and more space flexibility along with additional isolated, negative air pressure rooms,” said Architect and EYP principal Miranda Morgan, while speaking at Bisnow‘s ‘The Future of DFW Healthcare’ webinar. “The smaller footprints are just more efficient and lean. We are still providing everything that is needed, and we are still doing big huge patient towers. But instead of big luxury, patient rooms, clients are asking us to be closer to code and to get what you need in that space and provide the patient with a good experience, but don’t go overboard.”

A large focus of future design will be on keeping healthy and sick patients separate rather than feeding everyone through the same access points and maneuvering the same hallways. Luxurious common areas have lost some favor as health care systems shift toward making sure more rooms are available to isolate emergency care and hospital inpatients while also better managing various points of access to segregate healthy and sick populations on-site.

“We are examining the way patients flow through the facilities,” said Dwain Thiele, UT Southwestern Medical Centersenior associate dean. “Some of the most challenging are imaging facilities or places that previously did not have a large amount of space, hallways or waiting rooms. It is something we will be looking at in the future.”

“What we have seen through the pandemic from a needs standpoint is more access points for people to be seen and to have access whether through telehealth or smaller, faster clinics where people can get in and out,” Transwestern National Managing Director of Healthcare John Huff said. “I guess we realize we don’t all want to sit in a huge long waiting room for an hour.”

In the future, waiting rooms very well could be a thing of the past, with that square footage allocated to more isolated treatment rooms, health care experts said.

“Other trends here to stay include the ongoing push for more outpatient care centers and ambulatory facilities that can take care of non-life-threatening illnesses while hospitals are hit with pandemics,” Huff said.

“Technology also will play a significant role in reshaping the future of health care, with telemedicine, or remote health care visits, allowing hospitals to keep healthier patients away from pandemic-stricken areas,” Methodist Health System Chief Operating Officer Pamela Stoyanoffsaid. “I would say prior to COVID, we probably saw about 1% of visits in the outpatient setting with telehealth. In April and May, when we saw the first surge, we were probably up to 80% to 90% of our visits. When some of the restrictions lifted, telehealth usage dropped back down to 15%, but it’s expected to have a place in the future of health care services. It is now a massive part of what we do, and it is here to stay.”


Source: Bisnow

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Medical Office Building Developers See Opportunities And Expect Project Growth In 2021

Although medical office buildings (MOBs) are once again showing their strength as an investment and ownership product during the COVID-19 pandemic, some professionals involved in the sector have expressed concern that there could be a slowdown in the development of such facilities in the next couple of years.

Although such a concern could indeed prove to be true, professionals with some of the MOB sector’s largest and best-known development firms, as well as full-service healthcare real estate HRE) firms that provide development services, recently expressed that they are remaining as busy as ever, and should be for at least the next year or longer.

HREI™ Editorial Advisory Board members say the number of requests for proposals (RFPs) and the level of development activity during the COVID-19 pandemic have come as a pleasant surprise, and they say they expect 2021 to be another strong year.


Source: HREI

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Medical Office Building Sales Fell Nearly 50 Percent In Q2, But The Sector’s Outlook Is Strong

The volume of MOB investment sales transactions in the second quarter of 2020 totaled around $2.2 billion, a 43 percent decrease compared to a year ago. In the first quarter of 2020, MOB investment sales volume reached $3.7 billion, according to data firm Real Capital Analytics (RCA).

The CoStar Group, another provider of commercial real estate data, pegs MOB investment sales volume at around $2.1 billion in the second quarter, a drop of 54 percent from $4.7 billion from a year ago.

“The volume of sales has absolutely hit pause, it hit the brakes really hard in the second quarter. You saw a significant drop in sales volume,” says Keith Pierce, research manager for Southeastern region with real estate services firm Transwestern. “The price per square foot did not really shift that much for those sales that did close. But by and large, just everybody froze in late March and largely stayed frozen until sometime in June.”

Average cap rates on transactions involving MOB assets remained at 6.6 percent at the end of the second quarter, flat with the figure from a year ago and the first quarter of 2020, according to RCA. CoStar pegs average MOB cap rates at 6.7 percent, also registering no change from the previous quarter.

“I anticipate seeing somewhat of a flattening,” says Russell Brenner, president of the medical office and life sciences division with real estate investment firm CA. “Once the market truly opens up again and lenders, which have been very selective in where they lend, come back into the market in droves and in a more significant way, I think you may well see cap rates continue to fall. But for probably the next two three quarters, I think it will be a largely flattening of cap rates.”

Earlier during the pandemic, many Americans largely postponed elective procedures, which put a dent on revenues for medical office tenants. But in states where those facilities are reopening, industry sources are reporting pent-up demand.

“We saw very few delinquencies, perhaps a handful of rent deferral requests, but by and large, the healthcare medical office tenancy as a whole stood up very well,” says Brenner. “Certainly now that elective procedures are back on in most parts of the country, MOBs are poised to bounce back and will continue to be a stable and reliable asset class.”

“Medical practices are running at 90 to 95 percent of pre-pandemic levels,” says Steve Hall, senior managing director for healthcare advisory services at Transwestern, who expects this level of demand to continue through the end of the year.

“Many of the company’s tenants are back to 80 percent of pre-pandemic levels of procedures and services,” says Jon Boley, senior vice president of acquisitions and development for HSA PrimeCare, a firm that develops, leases and manages medical facilities.

“The reason these businesses are not back to 100 percent is because they are having to do above-standard cleaning in order to disinfect surgery centers throughout the day,” Hall notes. “A factor that will shore up MOB assets in the future is the dearth of new construction happening right now. During a pandemic, a lot of people aren’t pulling the trigger on a brand new construction. The lack of construction going on right now I think is really going to keep the market strong since there is not going to be oversupply.”


Source: HREI

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The CARES Act Is Positioning Healthcare Real Estate For A Bright Future

The Coronavirus Aid, Relief, and Economic Security Act, known as The CARES Act, was passed with great fanfare and a lot of promise.

In a lot of ways, it hasn’t lived up to that hype as small businesses struggled to get the help that they needed. But Kyle O’Connor, President and Founder of MLL Capital, which owns medical and life sciences facilities, thinks one sector was well-positioned to benefit from The CARES Act.

“One of the things that has been a big help for the medical industry has been The CARES Act, whether it be the payroll protection program [PPP] or the other funding that went to the health systems,” O’Connor says. “That has, I believe, helped quite a bit.”

O’Connor thinks the medical sector has received many benefits from the act that haven’t been there for other sectors.

“If you look throughout the economy, not every type of business was as well suited as the health care industry was to take advantage of the payroll protection program,” O’Connor says.

The employee size limitation for PPP grants is 500 employees. Since most medical offices won’t clear that threshold, they are great candidates for that funding.

“Most medical practices plan to rehire all of their laid off or furloughed employees given they expect demand to resume,” O’Connor says. “It’s also important to note that the health systems received/will receive funding from other elements of The CARES Act. In the medical field, The CARES Act has allowed doctor’s offices to keep critical medical workers employed. The doctors can only see so many people. So the nurse practitioners, the administrative staff, all the nurses that support each individual practice are a pretty important part of the system.”

Doctors are also adopting things like telehealth to offset a decline in office visits.

“The occupiers in our buildings were organizing themselves for dealing with the issues that have been caused by the stay-at-home orders,” O’Connor says.

Once the COVID crisis eases up or clears, O’Connor does not doubt that patients will return to medical offices. And demand could be even more significant as there is pent-up demand for medical services.

“They’re going to be much more comfortable going back to the doctor, and there will be a flood of requests for appointments,” O’Connor says. “There will likely be greater levels of health care that is being provided as the impact of the stay-at-home orders dissipates.”

The support from The CARES Act, in addition to the resilience of the sector, has made O’Connor optimistic about its future.

“Medical offices and life science property types have a defensive element to them,” O’Connor says. “We are going to hold their value better than some of the other property types.”


Source: GlobeSt.

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Survey: Patients Strongly Prefer Off-Campus Healthcare Experiences

In an effort to uncover critical insights into patient behavior and serve as thought leaders within the healthcare real estate industry, Physicians Realty Trust (the “Company”) commissioned an independent survey in five of the Company’s largest markets to better understand consumer perceptions of healthcare facility safety within the context of the COVID-19 pandemic.

CVR and Carmichael & Company, healthcare consultants based in Indianapolis, conducted the panel-based survey for the Company, surveying the AtlantaDallasLouisvilleMinneapolis, and Phoenix markets. A total of 2,018 respondents were surveyed, resulting in an average margin of error of 2.19% across the five markets.

Strong Consumer Preference for Off-Campus Medical Facilities

The research revealed that when seeking medical treatment, the overwhelming majority of respondents prefer to receive care in an off-campus medical facility located a mile or more from a hospital campus. Based on survey results, this trend is likely to continue for the foreseeable future due to COVID-19, especially given concerns regarding a possible resurgence of the virus later this year.

“The findings affirm our long-term observations in consumer attitudes and validate the Company’s continued investment strategy targeting off-campus medical office buildings,” said John T. Thomas, President and CEO of Physicians Realty Trust. “As thought leaders in the healthcare industry, we commissioned this research to advance our understanding of COVID-19’s impact on our business, as well as provide insight and guidance to our healthcare partners.”

In the report, respondents also provided insights on enhanced safety and hygiene protocols, spokesperson preferences for COVID-19 communication, and other shifting perceptions of healthcare highlighted by the pandemic.

“For many years, consumers and physicians have been seeking services at locations convenient to them and their homes, often away from hospital campuses,” Thomas added. “This study verifies that especially in light of COVID-19 safety and cleanliness concerns, consumers strongly prefer medical office facilities located away from the hospital campus.”

The Company is sharing these findings with its healthcare partners and stakeholders to increase awareness and better understand healthcare consumers’ decisions.

To access the report, go to


Source: PRNewswire

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COVID-19 Will Accelerate Property Repurposing

In many ways, COVID-19 is accelerating transitions that had already been occurring in the commercial real estate world.

“People think we should open up the economy sooner,” says Newmeyer Dillion partner Mike Krueger. “But I don’t think anybody’s saying that this isn’t going away anytime soon.”

Ultimately, Krueger predicts that COVID-19 will force “some very creative repurposing of properties.”

“We’re going to see very creative developers come in and repurpose those properties for their next use,” Krueger says. “At this stage, we don’t even know what the best use of some properties will be.”

Krueger says that is already happening in malls. In some places, they’re being repurposed by medical organizations.

“You may have a J.C. Penney’s in a huge building that could be perfect for an oncology department or maybe perfect for outpatient medical treatment,” Krueger says. “The rest of the stores might still be vacant, but that one building is great for that a medical use.”

Malls may have other advantages for conversion to other uses. For instance, a large mall will be ADA compliant.

“It’s going to have elevators and escalators,” Krueger says “Maybe an abandoned mall is a perfect opportunity to put a nursing home or some assisted living facility because you already have all these access points.”

Malls, which are also near public transit and bus lines, would also provide plenty of space to create completely independent units that are not on central air, if ventilation is a concern, according to Krueger.

“I think we’re still waiting on a lot of guidance,” Krueger says. “The insurance companies are really going to be the ones that are going to dictate this.”

But malls are just one example of how COVID-19 could change spaces.

“We are now looking at a complete revolution in what retail and commercial spaces are going to look like, especially in the restaurant industry,” Krueger says. “Depending on where you are, you’re going to have different counties with different restrictions. At least in the Bay area, we know that the post-COVID-19 restaurant experience is not going to be the same as pre-COVID-19, namely and the occupancy space.”

Offices are another place ripe for change. While teleworking had been growing steadily as a trend for a while, Newmeyer Dillion partner Mike Krueger thinks the news that Twitter is allowing its employees to work remotely indefinitely will spark discussions at a lot of large firms in The Bay Area.

“For large tech companies that are renting out giant spaces in downtown San Francisco or anywhere in the Bay area, anywhere where commercial real estate is very expensive,” Krueger says. “Now, all of a sudden, you see some of the most visible tech companies out there saying, ‘We don’t even need our commercial space.’ I think you’re going to see a significant change around what that space is going to be useful and how that space is being used.”


Source: GlobeSt.

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Survey: Healthcare Designers Look To Future Of Medical Facilities In Light Of COVID-19 Pandemic

The American College of Healthcare Architects (ACHA) has released the key findings of a survey of its members revealing their insights on the future of healthcare architecture and the role of design in the context of the COVID-19 healthcare crisis.

“The extensive experience of ACHA’s healthcare architects gives us unique insights into how this pandemic will shape the future of healthcare,” said Vince Avallone, AIA, ACHA, CASp, LEED AP, the ACHA‘s President. “These findings will influence the design of hospitals and healthcare environments for years to come.”

ACHA Coronavirus Survey Reveals Healthcare Designers’ Role In Addressing The Pandemic

The ACHA survey revealed:

  • Over 63% of respondents helped clients evaluate alternative care sites.
  • Over 60% of ACHA experts were called on to help healthcare systems increase capacity – 28% created over 100 beds.
  • Over 70% of respondents believe design for mass casualty patient surges will be an important element for hospitals in the future.
  • Over 80% of respondents thought the telehealth boom would have major impact on facility design.

ACHA surveyed 129 certified professional healthcare designers to reveal lessons learned from COVID-19 and the role of architects in addressing the crisis. Participants represent areas across North America, including many severely affected states such as New York, New Jersey, Illinois, Massachusetts, California, and Pennsylvania.

What Will Happen With Healthcare Facilities After The COVID-19 Pandemic?

The survey also identified the healthcare designers’ concerns about the future:

  • How can hospitals be designed so normal operations (such as elective procedures) can continue through a pandemic so as not to disrupt regular patient treatment and create financial shortfalls for providing institutions?
  • With the likely implementation of restrictions on patient/visitor traffic flow to control cross-contamination, how will this transform facility intake and entry design?
  • How will increased restrictions placed on patient/visitor traffic flow to control cross-contamination transform facility intake and entry design?
  • How can architects emphasize building flexible, adaptable facilities that can be easily modified to allow a quick response to changing medical priorities?
  • How can healthcare and non-healthcare facilities be designed to handle patient overflow in a more expedient fashion?

ACHA Member Represent The The Top U.S. Healthcare Design Firms

“ACHA certificate holders represent a majority of the nation’s top healthcare design firms,” said Avallone, a Vice President/Senior Medical Planner at SmithGroup. “These results show our continuing commitment to help develop solutions for future healthcare design challenges. ”

For the full results of the survey, click here.


Source: Building Design+Construction


The COVID-19 Shutdown Tests Medical Office Buildings As An Investment

As U.S. health-care systems limit medical services to emergency and urgent care situations in the face of COVID-19, medical office buildings are standing empty, and the threat of tenants missing lease payments mounts.

Still, experts say, investors have every reason to keep MOBs high on their list of sector favorites. In addition to pent-up demand, strong sector fundamentals—aging Baby Boomers, expanded medical insurance coverage, new treatment options and shifts in service delivery—are expected to aid the MOB sector’s rebound and its love affair with investors.

“Medical office buildings and other outpatient care settings have been hot commodities in commercial real estate investment for the past several years,” according to Cushman & Wakefield’s 2020 Health Care Investor Outlook released at the end of last year. “Legacy investors are doubling down on the sector, while new investors are competing for the limited product supply.”

In the meantime, medical office building owners will have to wait for tenants and their patients to return.

Most owners are trying to not make an impulsive decision, to wait and see how this situation plays out,” said Allen Bolden, a partner with HB Medical Real Estate.

But despite the MOB market’s underlying strength, too much time may prove to be an enemy.

The fact that we don’t know if this will last another week or several months is why we can’t give solid answers to the future,” Bolden added. “The only thing we do know is the longer the economy is shut down, the more this will test the strength of MOBs as an investment.”


Source: CPE

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Medical Office Buildings Poised For Quick Recovery

While hospitals and health-care facilities have been inundated by an influx of COVID-19 patients, many medical offices that offer non-emergency services have seen the opposite occur.

The property type’s solid fundamentals prior to the virus, however, promise a relatively rapid rebound when the economy is up and running again, according to Marcus & Millichap’s April special report on medical office buildings.

With many shelter-in-place orders in effect, communities across the U.S. are avoiding unnecessary travel and exposure, including those patients seeking elective surgeries or nonessential surgical and dental procedures. As patients decide to reschedule their appointments until further notice, many medical offices aren’t generating revenue and have had to partially, or fully, close.

The Post COVID-19 MOB Market

The COVID-19 pandemic has already left its mark on different facets of commercial real estate like office leasing, construction and retail. While the medical office building market was not spared, its strong market fundamentals prior to the emergence of the new coronavirus offer signs of a healthy market after the pandemic ends.

The national vacancy rate for medical office buildings was 90 basis points below the trailing 10-year-average of 9.7 percent, according to the report. The U.S. market also saw 6 million square feet of medical office space absorbed in 2019. Following demand, the below-average availability of medical offices has led to a steady stream of new properties, with deliveries hitting 10 million square feet. The statistics have attracted the attention of private investors looking for assets between $1 million and $10 million.

Once the COVID-19 pandemic is under control and the economy recovers, the medical office building market is expected to bounce back. The combination of an aging population, expanded medical insurance coverage and new treatment options equate to a growing demand for health care and the medical offices that come with it. Once the economy begins to return to normal, the backlog of work due to closed offices and rescheduled or canceled appointments will likely bring a sudden influx of work for medical-office staff.

And once the market returns to normalcy, the report noted that well-located assets with the infrastructure to handle modern medical needs will be in high demand. Specifically, medical office building demand may grow in non-urban markets as younger Millennials begin to move away from urban centers.


Source: Commercial Property Executive

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