Healthcare Organizations Planning More CRE Projects

CHICAGO-Though many observers consider healthcare real estate to be more recession-resistant than other real estate sectors, it, too, has experienced a somewhat slow recovery since the Great Recession bottomed out in mid-2009. And while a full recovery for both the economy and the HRE sector could still be a year or so down the road, some companies are seeing an uptick as more and more health systems are planning future real estate endeavors.

A group of industry experts recently shared viewpoints on their outlook for healthcare development during a panel discussion at a healthcare real estate conference that took place in Chicago. The panel was moderated by Murray W. Wolf, publisher of Healthcare Real Estate Insights. The panelists were: Shawn Janus, managing director, Jones Lang LaSalle Inc.; Todd W. Lillibridge, president and CEO, Lillibridge Healthcare Services, and executive VP, Medical Property Operations, Ventas Inc.; Keith Konkoli, senior VP, Duke Realty Corp.; Scott Becker, partner, McGuire Woods LLP and publisher, Becker's Hospital Review; and Tina Wardrop, VP, Health Directions LLC.

According to the panelists, the passage and upholding of the Patient Protection and Affordable Care Act (PPACA) has provided hospitals and health systems with more certainty as they plan for the future. As a result, many are feeling more confident about proceeding with real estate and facilities projects.

“With all that behind us, I think we're beginning to see greater activity,” Janus said.

The Chicago area's healthcare development scene has been a bit of “an anomaly,” he said, with several “blockbuster” acute-care hospital projects underway. Nationwide, however, more of the focus is on outpatient projects, as “healthcare reform and higher-acuity healthcare delivery (is moving) into the outpatient environment.”

JLL has been helping providers develop strategies for their real estate, he said, adding that many “are moving forward in a more dynamic fashion, looking at their real estate strategy, how they can position themselves to deliver patient care in this new world.”

Lillibridge said even though providers are indeed planning more, it could still be another year or two until development activity increases significantly. “The fundamentals of the business are good,” he said, because of “a limited supply of new healthcare facilities, a growing obsolescence of some older facilities and rising demand.

Konkoli of Duke Realty said his firm is seeing more outpatient development activity in off-campus locations, much of it being driven by the increasing number of physicians becoming employees of health systems.

“Opportunities are going to continue to move off campus” as providers seek to reduce costs, he said.

Becker, however, was less optimistic. “You're going to see tremendous economic pressure on healthcare provider's dollars,” he said. As a result, only the financially strongest systems will be able to afford major projects.

John B. 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.