"There are very different objectives than filling vacancies, and while that's important, that wasn't one of the objectives here," Conkling tells GlobeSt.com. "They are looking for ways to operate more efficiently, and what we do is focus on strategic consulting, program management, development and operation improvement services. Our firm has a business unit that's specifically dedicated to healthcare providers and many of the people in our group have come from that industry, so we have a clear understanding of the business fundamentals they want to achieve."

The diversified Catholic healthcare system is comprised of four hospitals. Alexian Brother properties now under JLL's management include Brock Medical Plaza and Wimmer Medical Plaza in Elk Grove Village, and Doctors Office Building One and 1786 Moon Lake Boulevard in Hoffman Estates. Conkling says asking lease rates at the medical offices are comparable with those in the northwest corridor submarket in general, where asking lease rates are around $24 per square foot gross, according to Cushman & Wakefield's Q1 office market report.

"They wanted to insure regulatory compliance by having an intermediary party represent the hospital, and to enhance their relationship with physicians and manage their buildings with more of a customer service focus and attitude," Conkling says. "In looking after their tenants, they're ensuring continuity of occupancy and improving occupancy of these buildings. At the same time, they align very well with what's taking place in the business world with wanting to operate their buildings more efficiently and achieve a cost savings."

The first step of JLL's work was to do a strategic assessment of all the properties, which include ambulatory facilities, physician offices, and other administrative and supply chain buildings. "We looked at them from physical, economic, financial, legal and operational perspectives," Conkling says. "As a result of that study, we helped them understand what their costs were and made recommendations on how they could improve their operating and value. In many cases, we looked at how you can leverage staff to provide services to these buildings in a more efficient cost structure."

Changes made based on this analysis have afforded Alexian Brothers a projected 10% cost savings from changes made so far, just a few months into the assignment, Conkling says. "With the significant compression on hospital margins right now, healthcare providers are increasingly looking to their non-hospital portfolio as a way to achieve more efficient operations and reduce costs," Conkling says. "Alexian Brothers is a unique example of the kind of overview and strategies that can be deployed fairly quickly to achieve significant operating cost savings."

Overall occupancy in the northwest corridor is around 73%, according to Cushman's research, however Conkling says medical office is faring better than the rest. "Medical office space tends to be more stable than commercial office space," he says. "Generally speaking, there are longer-term leases and spaces are improved in a way that if users do leave, it's very easy for a replacement tenant to move in without a lot of interior improvements. But healthcare providers have not been immune to the impact of the economy, so they're looking to cut costs and improve services."

Instant Insights /

JLL To Manage 700,000-SF Portfolio

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