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Healthcare Tenant Base Shifts from Small Practices to Large Clinics

The healthcare tenant base is slowly changing, morphing from single-physician private practices to multi-specialty clinics affiliated with health systems. It’s a shift that’s changing the way the healthcare real estate industry approaches development and acquisition, according to panelists who participated in Connect Healthcare’s panel titled Market on Fire: The New Generation of MOB’s, Mixed-Use Facilities & More.

Instead of physicians starting out in private practice, they’re choosing to align themselves with health systems and or large physician groups in “giant” clinic environments, noted Hobbs+Black Architects’ John Barker. Many of these clinics are bypassing traditional MOBs and repurposing vacant retail boxes. For example, his firm recently gutted a dark Kmart and turned it into an ambulatory clinic with an atrium running down the middle of the building.

Stockdale Capital’s Andrew Saba has seen medical users seek out space in traditional office buildings because of their strategic location. “We’re focusing on how patients interact with space,” he said. “We’re paying attention to patient experience.”

Brandon Sudweeks of Sudweeks Development & Investment Company is working with federally qualified health centers (FQHCs) that are expanding their footprints from roughly 5,000 square feet to 45,000 square feet. The expansion is driven almost exclusively by reimbursement and payments. “They’re paid by the number of exam rooms,” he explained.

Two panelists—CareTrust REIT’s Mark Lamb and Blueprint HCRE’s Jacob Gehl—focus on post-acute care and seniors. Lamb noted that acute care providers are sending patients to post-acute care centers to control cost of care. The larger facilities aren’t full, he said, and the 40-bed to 50-bed model is where the demand is. He added that post-acute providers are working hard to minimize and prevent patient “bounceback” to hospitals.

Gehl said many markets are overbuilt with transitional rehab centers, or TRCs. As a result, his firm is doing quite a bit of disposition work. A lot of buyer interest is coming from behavioral health providers that specialize in drug and alcohol addiction.

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