The State of Houston Healthcare

Fundamentals are looking very strong in healthcare real estate, according to experts at Bisnow’s Healthcare Real Estate Summit yesterday. Transwestern VP Brandy Bellow Spinks (who played Division I soccer for Rice) says rents have been very strong this year, and she forecasts a 2% increase in 2015. On the flip side, landlords who are aggressive about TI packages and building out spec suites are getting the highest absorption and best tenants. She expects construction to get easier this year—pricing is dropping, and timelines are shrinking again as contractors and permitting are shouldering a smaller workload. Pictured, Brandy and fellow panelist CBRE VP Nelson Udstuen bookend Memorial Hermann’s Kirk Guilanshah and CBRE’s James Froelich.

Cap rate disparity is shrinking between on-campus and off-campus/suburban healthcare properties, Colliers co-chairman Bob Parsley tells us. Now financing is more tied to a property’s or owner’s affiliation with top hospital systems. Bob (here with NGKF’s Sam Sheff) says Texas is unique from a healthcare perspective—we have no Certificate of Need requirements and our free market makes people nervous. All the same, our demographics and growth are attracting owners. (For example, Griffin Capital bought a 19-property Texas-heavy portfolio earlier this year.) Bob is the oldest of 10 siblings, and has 29 nieces and nephews.

Staffing is one of the biggest challenges facing hospital systems today. It’s hard to expand your practice and footprint without spreading yourself too thin, and Houston has a shortage of primary care doctors. That’s leading to a lot of M&A activity and physician group acquisitions. Trammell Crow principal Davis Griffin (above, between Memorial Hermann’s James Bretting and Caddis’ Jason Hinkel) says small groups are becoming large groups and then super groups, but real estate is getting smaller as spaces get more efficient and the merged companies share facilities. Davis was an avid traveler before having kids; she’s visited six of the seven continents.

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