Colliers International US Medical Office Update 2014

1. Medical Office Update (US)
Andrea Cross, National Office Research Manager | USA
John Wadsworth, National Director Healthcare Properties
March, 2014

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. 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
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4. What Are the Key Drivers of the MOB Market?
#1: Aging Baby Boomer Population
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5. What Are the Key Drivers of the MOB Market?
#1: Aging Baby Boomer Population
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6. What Are the Key Drivers of the MOB Market?
#1: Aging Baby Boomer Population
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Annual number of physician office visits 70% higher among
65-74 year-olds than 45-64 year-olds.

7. What Are the Key Drivers of the MOB Market?
#2: Affordable Care Act (ACA)
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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. What Are the Key Drivers of the MOB Market?
#2: Affordable Care Act (ACA)
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Electronic Health Records (EHR) requirements being phased in to
improve provider coordination

9. Healthcare Industry Employment Trends
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Outpatient, home health care employment driving overall healthcare
employment.

10. Healthcare Industry Growth Widespread Across
Geographies
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Large, in-place older populations supporting healthcare demand in
Northeast and Midwest.

11. Healthcare Industry Growth Widespread Across
Geographies
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Above-average population growth driving healthcare demand in
South and West.

12. What Do These Trends Mean for MOBs?
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MOB vacancy rate remarkably stable despite uncertainty caused by ACA.

13. What Do These Trends Mean for MOBs?
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Construction activity down significantly in recent years.

14. Retail Space Conversions
Sources: ULI, Kaiser Permanente

15. Open Layouts
Sources: ULI, Davis Partnership/Align Healthcare

16. MOB Performance by Market
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Small, southeastern markets top the list: strong demand, little new supply
Overbuilt Sunbelt markets starting to recover

17. MOB Investment Surging
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Q4 2013 MOB investment totaled $2.47 bil., approaching Q4 2006 peak,
cap rates trending down.

18. Cap Rates Trending Down
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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. 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
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20. 20
Colliers International
Healthcare Services Group
Specialized Real Estate Solutions
Presented by:
John Wadsworth
National Director
An Introduction to…

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. Patient Protection and Affordable Care Act, aka “Obamacare”…
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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
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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
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. 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. 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. 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
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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!
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30. 30
“We take our job seriously…”

31. Medical Office Update (US)
Andrea Cross, National Office Research Manager | USA
John Wadsworth, National Director Healthcare Properties
March, 2014