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Medical Office Has a Fever

We can't help but notice that medical office is on fire these days. We're even hosting a San Francisco Healthcare Real Estate Summit tomorrow to talk about it. San Ramon-based Meridian Property Co COO John Pollock let us in on what that means for his schedule.

Right after he's done speaking at our event at Union Square's Hotel Nikko, John will have to book it down to Silicon Valley, where he's going before the Mountain View design review board with an application for an outpatient clinic. (He sure does get around the Bay Area, snapped here in wine country with his lovely wife Susan.) 

We wrote last week about Meridian's most recent purchase: a 69k SF medical office building in Sonoma County at 5900 State Farm Dr in Rohnert Park. The plan is to upgrade the lobby and fill the top, recently vacated floor with a medical user that has a larger square footage requirement of 35k SF or larger, or to four users needing about 7,500 SF each. (One for ears, one for nose, one for throat, and one for good luck.) Kaiser Permanente is the sole tenant, having occupied the first-floor space since 2003. (No more leaving your toys all over Kaiser; you're going to have company.)

John, splurging at Kokkari for the holidays, wants to figure out future tenant profiles for medical office buildings and how that will drive design, location, size, and amenities. Re-utilization of space is part of the equation, he says. He recently closed on a site in downtown San Rafael for a freestanding outpatient clinic, and the project won't be easy. The development required the purchase of an adjacent Victorian that will require renovation and re-sell to gain a small sliver of land required to do the clinic. (We've read Dickens novels with less complicated plots about Victorians.)

John, here again with his wife in Palm Springs, tells us there are three reasons for Sonoma's rise in healthcare demand: 1) the recent opening of Graton Casino and the forecasted creation of thousands of new jobs related to its operations.
 2) The planned redevelopment of the former State Farm campus into a mixed-use project will provide housing and also create additional jobs. 3) The Affordable Care Act and expansion of Medi-Cal will create a higher demand for primary care services.

We checked in on some other healthcare construction in the area. Sutter Health real estate director Ed Erwin filled us in on Alta Bates Summit Medical Center's new 250k SF, 11-story Patient Care Pavilion in Oakland (above), which includes 238 private, family friendly patient rooms and a new emergency department—all designed to meet or exceed state seismic safety requirements. The $385M project took a decade of planning and includes a $35M, 1,067-space parking garage. Ed works with local cooperating brokers to buy, sell, and lease the facilities to support the 45,000 employees in NorCal.

Ed (a selfie expert and speaker tomorrow) says Sutter Health's 2014 plans include looking forward to starting the San Francisco project and also making changes to bring in capital from non-core asset sales. He's hoping the NorCal market "doesn't price us out" of providing care in the neighborhoods "we need to be in." If you want to learn more, we hope you'll join us at the Hotel Nikko tomorrow morning