Marcus & Millichap's John Smelter<@SM>Todd Varney with Redina Cos.

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MINNETONKA, MN-One thing that most of the healthcare real estate professionals can agree on when looking at the future of the sector is this: there will be a need for new medical office buildings and other outpatient facilities in the years to come. Whether that demand results in a flurry of development activity in 2013 remains to be seen.

“We continue to see more demand from our existing clients, as well and an uptick in the number of RFPs and other service requests from other systems,” says Todd Varney, executive vice president of Jupiter, FL-based Rendina Cos., a healthcare development firm.

Andy Dow, an attorney and chair of the Healthcare Industry Group of the multi-office Winstead PC adds: “I think 2013 will be a great year for healthcare real estate and early indications are so strong that I am not out on a limb here.”

Developers and others involved in healthcare real estate who were interviewed for this story say a number of factors are contributing to what they call an increase in RFP activity. First of all, hospitals and health systems continue to be driven to deliver care in less costly settings such as outpatient facilities. Second, as they employ more and more of their physicians they are seeing a need for newer, more efficient space in which to consolidate the doctors.

Varney says that as physicians continue to join health systems, “the impact on medical real estate has been, and will continue to be, positive in terms of speed to market.”

Dow notes that changes enacted under healthcare reform requiring providers to be more accountable for the quality of the care they deliver is causing many systems to become involved in the continuum of care administered to patients.

“The focus on developing new facilities along the continuum of care is creating new opportunities for developers and investors,” he adds. “More systems are looking to third-party developers or joint venture (partners) for these types of projects… There will be plenty of opportunities for third-party developers and investors.”

John Smelter, senior director of the healthcare real estate group of Marcus & Millichap Real Estate Investment Services, noted that more MOB developments will be needed in 2013 as vacancies continue to fall, health systems demand new outpatient space, and 30 million or so newly insured patients – the result of healthcare reform  – flood the market. Marcus & Millchap reports that the current nationwide vacancy rate, at about 10.2 percent, is conducive to development activity.

“For 2012, the final figures will probably show that new deliveries were right around 10 million square feet for MOBs,” Smelter says. “That follows a couple of years in which new deliveries had been dropping. In 2011, there was just 5.7 million square feet of new space brought to market. Prior to the recession, the average year typically saw about 12 million square feet of new space. I could see us returning to that level in coming years.”


John Mugford is the Editor of Healthcare Real Estate Insights, the nation’s first and only publication totally dedicated to covering news and trends in healthcare real estate development, financing and investment. For more information, please visit www.HREInsights.com.