Healthcare Trends Affecting Medical Office Space

  • January 18, 2018
  • CRE
  • 0 Comments

With the economy shifting and new rules and regulations being put into place across the board, medical office space is among the real estate affected by all of these changes.  With uncertainty looming over what the future of healthcare reform holds and increased demand for healthcare access, you will want to watch the market closely in the upcoming year.  Here are a few trends we think you should keep an eye on.

Increased Demand

increased visits to hospital by baby boomersOne thing is for certain; the demand for medical office space is ever-increasing over the years.  As Baby Boomers begin to enter the age bracket for increased medical care, more and more healthcare services are springing up to keep up with the need.  Baby Boomers are projected to make up one in every five patients by the year 2050.  With numbers rising at such a proficient rate, it is safe to assume that the demand will be rising with it.

Micro-Hospitals

Over the past few years there has definitely been a rise in urgent cares and retail clinics in the world of medical office space.  Now, however, we are beginning to see the emergence of more and more micro-hospitals that are following a new set of rules when it comes to healthcare.  These smaller buildings are typically between two and three stories, and range anywhere from 35K-45K square feet.  Rather than offering the full range of services that the bigger hospitals contribute, these micro-hospitals are giving greater focus to some of the medical practices which are considered to be more in high demand.  They are providing emergency care, inpatient care, a selection of surgical procedures, and some may even offer labor and delivery services.  With the ability to offer much greater convenience to patients, this is a trend that you are sure to see more of in the coming year.

Expansion Over Relocation

The medical office space sector has been on a path of transformation when it comes to growth.  Many more existing medical facilities are choosing to expand their current properties and buildings as opposed to relocating altogether once their lease term has expired.  The choice to expand takes these facilities immensely less time, as well as having less of an impact on their bottom line financially.  It also allows health systems to provide these expanded services to their patients in an exponentially quicker turnaround time.  Another added benefit to expansion is that the existing location already has a proven track record in its ability to be accessible to the patient.

Fewer Independent Hospitals and Health Systems

Another trend that appears as though it will continue within the medical office space sector is the decline in independent hospitals and non-government health systems.  This decrease began in 2014 and is expected to persist until approximately 2024, at which time, according to Deloitte, only about half of the health systems are expected to be non-government and it is projected that the independent hospital will officially become a thing of the past.

New Leasing Arrangements

Over the past few years, the Financial Accounting Standards Board has implemented new rules which will definitely have an impact on leasing medical office space.  Whereas previously, long-term medical office space leases could be classified as operating leases from an accounting standpoint (which had far less effect on balance sheets), this new set of standards will classify these leases as financing leases.  These are to be considered a standing debt which will be reflected on the lessee’s balance sheet.  To offset these changes, developers have begun to get creative with leasing options, such as credit-tenant arrangements which allow the lessee to acquire property ownership once the lease expires.

Increase in Rehab Hospitals

Finally, you will likely notice that more and more medical office space is being leased out to accommodate emerging rehab facilities, particularly as more hospitals are partnering with off-site practitioners.  This is a means to offering patients greater post-discharge care and will also make for better cost-efficiency within the hospitals.

Looking for Medical Office Space in the Baton Rouge Area?

With the need for medical office space continuing on its upward trend, now is the time to find the property that suits your medical office needs.  Don’t search just anywhere, work with the best.  At SVN|Graham, Langlois, & Legendre, we have over 99 years of combined experience helping our clients create successful real estate transactions, from start to finish.  We pride ourselves on excellence and look forward to giving you a superior experience.  Take a look at our properties today and call us to get your search started!

0 Comments