Colliers Medical Office-Update

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Colliers International US Medical Office Update 2014

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Colliers Medical Office-Update

  1. 1. Medical Office Update (US) Andrea Cross, National Office Research Manager | USA John Wadsworth, National Director Healthcare Properties March, 2014
  2. 2. 2 About the 2014 Medical Office Outlook Report Colliers’ first-ever national medical office report Collaboration between Colliers Healthcare Services Group (CHSG), U.S. Research team and local market researchers Report supports CHSG’s activities by establishing Colliers as a thought leader in the MOB space Features healthcare industry overview, key healthcare real estate trends and investment market outlook
  3. 3. About the 2014 Medical Office Outlook Report Features detailed market-level statistics for 39 U.S. markets Key differentiator from reports produced by our competitors More markets to be added in future iterations of the report 3
  4. 4. What Are the Key Drivers of the MOB Market? #1: Aging Baby Boomer Population 4
  5. 5. What Are the Key Drivers of the MOB Market? #1: Aging Baby Boomer Population 5
  6. 6. What Are the Key Drivers of the MOB Market? #1: Aging Baby Boomer Population 6 Annual number of physician office visits 70% higher among 65-74 year-olds than 45-64 year-olds.
  7. 7. What Are the Key Drivers of the MOB Market? #2: Affordable Care Act (ACA) 7 U.S. healthcare costs highest in the world by a large margin Goal of ACA: insure more people while achieving lower-cost, more successful outcomes
  8. 8. What Are the Key Drivers of the MOB Market? #2: Affordable Care Act (ACA) 8 Electronic Health Records (EHR) requirements being phased in to improve provider coordination
  9. 9. Healthcare Industry Employment Trends 9 Outpatient, home health care employment driving overall healthcare employment.
  10. 10. Healthcare Industry Growth Widespread Across Geographies 10 Large, in-place older populations supporting healthcare demand in Northeast and Midwest.
  11. 11. Healthcare Industry Growth Widespread Across Geographies 11 Above-average population growth driving healthcare demand in South and West.
  12. 12. What Do These Trends Mean for MOBs? 12 MOB vacancy rate remarkably stable despite uncertainty caused by ACA.
  13. 13. What Do These Trends Mean for MOBs? 13 Construction activity down significantly in recent years.
  14. 14. Retail Space Conversions Sources: ULI, Kaiser Permanente
  15. 15. Open Layouts Sources: ULI, Davis Partnership/Align Healthcare
  16. 16. MOB Performance by Market 16 Small, southeastern markets top the list: strong demand, little new supply Overbuilt Sunbelt markets starting to recover
  17. 17. MOB Investment Surging 17 Q4 2013 MOB investment totaled $2.47 bil., approaching Q4 2006 peak, cap rates trending down.
  18. 18. Cap Rates Trending Down 18 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% Q1 '06 Q3 '06 Q1 '07 Q3 '07 Q1 '08 Q3 '08 Q1 '09 Q3 '09 Q1 '10 Q3 '10 Q1 '11 Q3 '11 Q1 '12 Q3 '12 Q1 '13 Q3 '13 Medical CBD Suburban Note: Latest data as of Q4 2013 Source: Real Capital Analytics
  19. 19. Links CHSG: http://www.colliers.com/en-us/us/healthcareservices US Research: http://www.colliers.com/en-US/US/insights MOB Report: http://www.colliers.com/us/medical-1H Contact Info Andrea Cross National Office Research Manager | USA Direct: 415.288.7892 Email: andrea.cross@colliers.com CI_AndreaCross 19
  20. 20. 20 Colliers International Healthcare Services Group Specialized Real Estate Solutions Presented by: John Wadsworth National Director An Introduction to…
  21. 21. Colliers Healthcare Services Group (CHSG) Overview Formed in 2005, “Organically Grown” 76 members in US 34 markets, London and Hong Kong Service Offerings:  Brokerage  Property Management  Valuation & Appraisal  Project Management  Market Research  Strategy & Consulting $1B in Gross Transactions 2013 Key Differentiator: CHSG is Healthcare Real Estate Solutions Provider: “If you are in the healthcare real estate business, by default you are in the healthcare business”
  22. 22. Patient Protection and Affordable Care Act, aka “Obamacare”… 22
  23. 23. ACA Impacts on the Healthcare Industry, Resulting Trends: March 2010 present: Major shift in US healthcare delivery system Fee for service fee for quality Healthcare “consumer“ driven Lower payments (reimbursements) from the Feds & Insurance Companies New pressure on Hospitals/Providers to:  Cut cost / Improve quality  Coordinate care for better outcomes  Preserve margins via savings (vs. more revenue) Mandate for efficiency = Massive healthcare industry consolidation 23
  24. 24. Hospital Mergers and Acquisitions  5,000 hospitals in the US  2012: $143B in healthcare M&A  2013, topped 100 mergers US Physician Consolidation  2000: 682,470 physicians in the US / 57% independent  2013: 792,594 physicians / 36% independent 24
  25. 25. 25 Shift in Tenant Profile Flexibility In-patient to out-patient: higher acuity care moved to the MOB setting Hospital driven monetization Repurpose of non-medical assets to medical facilities Regulatory Compliance ACA Impact on Healthcare Real Estate, Resulting Trends:
  26. 26. Challenge 170,000 SF, 176-bed “dark” acute-care hospital 1970’s construction / compliance with CA seismic standards Find a new hospital operator to re-use the facility vs. redevelop Healthcare Reform Strategy Determine feasibility / cost of re-use of existing building Position as re-opportunity to comply with HC Reform Perform need/gap analysis for full “continuum of care” Roadshow presentation to prospects Success Story Century City Hospital, Century City, CA
  27. 27. Success Story Century City Hospital, Century City, CA Results Secured a provider with a need to develop an “acute-rehab” facility Building re-purposed / modernized to comply with licensing req’s Partnership between UCLA, Cedars Sinai and Select Medical Executed 17 year, $80M lease
  28. 28. 50 acres / 1.2M SF Full continuum of healthcare to be developed CHSG awarded assignment in 2013 to market, lease and sell Current Project Canyon Springs Healthcare Center 28
  29. 29. How can you partner with Colliers Healthcare Services Group? Step #1 – know that CHSG exists, is “healthy” and expanding! Leverage CHSG platform to pursue HC – “b/c you don’t understand it, don’t ignore it” Expand service offerings (beyond brokerage) to existing healthcare client Collaborate! 29
  30. 30. 30 “We take our job seriously…”
  31. 31. Medical Office Update (US) Andrea Cross, National Office Research Manager | USA John Wadsworth, National Director Healthcare Properties March, 2014
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