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Pandemic Pushes Healthcare Real Estate Into New World Of Better Amenities And More Appealing Spaces

The coronavirus pandemic will end at some point, but it's likely to leave a permanent mark on U.S. healthcare real estate.

Staffing shortages and other strengthening trends will lead developers to provide more amenities, both for employees and patients, according to panelists at Bisnow’s Chicago Healthcare Update last week. That means creating the kinds of environments in medical office buildings and clinics that are now common in other modern, Class-A office buildings.

“What we saw is we had to make people comfortable coming back to work,” Mortenson Healthcare Development Executive Maggie Beckley said at the event.

Necessary changes include, at minimum, providing more spaces for people to spread out on lunch breaks and redesigning waiting rooms to allow for more entrances and exits.

Silver Cross Hospital’s new medical office pavilion in suburban New Lenox, Illinois.

These are not easy times to provide healthcare even if the number of Covid-19 hospitalizations is far fewer than the tidal wave of cases seen over the winter.

“We’ve always struggled to fill certain positions across the healthcare system, but the pandemic has exacerbated that,” said Jill Gewargis, director of real estate strategy for Northwestern Medicine, a nonprofit affiliated with the Northwestern University Feinberg School of Medicine. Northwestern recently set a record for vacancies, although it is also hiring at a record pace, bringing in about 400 people to its latest new-hire orientation.

Making new facilities as attractive as possible will be key to future development, Ryan Cos. Director, Real Estate Development, Healthcare, Curt Pascoe said.

“We’re really entering a new world, whether it’s healthcare or office, where people have to want to go to these spaces," he said. "Whether it’s fitness, a deli, or selecting a land position that is proximate to retail, or other amenities like daycare, this is becoming more important because the labor race is on.”

Echo Development Group principal Jon Boyajian added that much of the nation’s medical office real estate is antiquated and placed in locations no longer considered appropriate.

“They’re tucked behind office parks,” he said, adding that “I’m not interested in trying to acquire and fix up older medical office buildings.”

Instead, as the sector undergoes reconstruction, developers will have to keep in mind that today’s consumers want convenience. The medical office buildings and clinics that attract tenants will be new ones along major highways, adjacent to grocery stores and other services, so family members can get some shopping done or run errands while they wait.

Autodeak Construction Services' Majd Ello, Echo Development Group's Jon Boyajian, Ryan Cos.’ Curt Pascoe, Northwestern Medicine’s Jill Gewargis, Mortenson’s Maggie Beckley and Physicians Realty Trust’s Deeni Taylor

“These are all things you might typically associate with a retail business or location,” Boyajian said. “To take the delivery of care from that old, antiquated medical office building that doesn’t have great signage — and it’s not easy to find — and move it to a medtail location, it makes it more convenient as well as an amenity for the patients, and more convenient for those that work there.”

In the past few years, healthcare systems have been moving more services off-campus to ambulatory clinics and other medical office properties, leading to demand for ever-larger off-campus facilities. The pandemic, too, is strengthening that trend.

“The majority of our medical office buildings are off-campus and average 50K SF or better,” Physicians Realty Trust’s Deeni Taylor said. “So, the size of medical office buildings away from campus with the growth of ambulatory [clinics] was there before the pandemic. Once that hit, we continued to see, over the past year and a half, a preference by both staff physicians and patients that if care could be delivered away from a hospital in medical office settings, that’s a preference.”

As a Floridian, Taylor said he is seeing in-patient surgeries and procedures being delayed or canceled and moved to ambulatory outpatient medical office buildings.

“There’s really an awareness of [the importance] of these ambulatory settings," he said. "For us, that’s where our investments, for the most part, are going instead of on-campus.”