OC Healthcare Just Keeps Getting Hotter. Here's Why.
The OC healthcare sector is on track for increased leasing velocity and investment sales over the next two years, CBRE VP Chris Isola tells us. Hear more from Chris and our other all-star panelists at Bisnow's 4th annual Orange County Heathcare Summit on Thursday at the Newport Beach Marriott Hotel & Spa, starting at 8am.
Chris (snapped with his wife, Lauren, on a recent trip to Vietnam) tells us on the leasing front, demand will be generated through continued consolidation of the market. Compared to LA, Orange County has already experienced significant consolidation to create two sizable systems that control nearly 50% of the market share—St. Joseph Hoag Health and MemorialCare Health System, affiliated with UC Irvine Health. He anticipates consolidation will drive the need for new, modern outpatient facilities.
The investment market for healthcare properties is back to peak levels with Class-A buildings trading at cap rates in the low 5s, Chris says. "The demand for product is greatly outpacing supply, with significant money having been raised by the public and private REITs, as well as institutional capital players," he notes. He expects health systems to capitalize on this opportunity to monetize their real estate. Chris and partner Bryan Lewitt recently completed a lease on behalf of MemorialCare for 25k SF at a to-be-constructed medical office building in Huntington Beach.
Another speaker will be DPR Construction director Ron Rendina, who tells us with hospitals being “overbed” in many healthcare systems, reimbursements shrinking, and everything in our world being operated via an app, there's a lot of uncertainty going forward. "The technology we used as builders even three to five years ago is becoming obsolete, which forces us to develop new processes and ways to deliver our services," he says.
Another speaker will be Taylor Design president Randy Regier (he's the one moving the blue post-it note), who tells us that several things are affecting firms like his these days: technology, a rapidly shifting market and a shortage of resources, to name a few. "Like our clients, we're faced with increased competition. As the market continues to shift from an emphasis on acute care to ambulatory care, there are more players in the market," he says.
Another speaker will be Hoag Memorial Hospital Presbyterian SVP real estate, facilities, construction and operations Sandy Smith, who tells us the challenge for major health systems now is to deliver on their promise of increased patient value. That means a delicate balancing act of focusing on improving the quality and effectiveness of the care, while simultaneously focusing on reducing the cost of the care delivered.
That's the catalyst for the transformation of the industry and is driving the real estate response as well, Sandy adds. It poses a number of questions, he says: Do we have the right access points? Are we providing the care in the most appropriate setting? Are we utilizing technology to its full extent? "All of these questions have the same root challenge, to increase patient value," Sandy explains. Pictured: Hoag Memorial Hospital Presbyterian. Hear more from our healthcare property experts at the Healthcare Summit on Thursday at the Newport Beach Marriott Hotel & Spa, starting at 8am. Sign up here.