All eyes have been on the healthcare industry in light of the recent COVID pandemic. And while there was a significant push for telehealth medicine where patients could schedule virtual visits with their doctor in order to maintain social distancing protocols, patients are now vying to see their doctors face-to-face. Consequently, there is a growing need for medical space. And in a post-COVID world, the expectations for meeting that demand has changed significantly.
“There is absolutely more demand for medical office space across the United States,” explained Stacy Shapiro, CCIM, vice president of Colliers International Las Vegas office. “Las Vegas specifically has a huge demand for healthcare. We have been lacking in that sector for some time and providing quality centers of excellence. That’s why a lot of people have to travel outside of Las Vegas to get certain levels of care. The demand is definitely there. There are just a lot of challenges with staffing, an educated workforce, and having the money to build these facilities.”
Despite the growing need for medical space, inflation, paired with delays in the supply chain, have also made it increasingly difficult to meet the demand. As a result, off campus facilities for medical office space have become popular. And as a way of mitigating the costs of construction, many people are seeking to repurpose existing office space.
“I do see a whole lot more repurposing of existing spaces instead of ground up spaces,” said Joe Garcia, healthcare project executive for SR Construction. “They are innovating ways to work around some of these supply chain challenges and not being able to get the equipment. [The thought process is,] ‘Let’s take an old retail space and convert it into medical office space. Let’s utilize this available space that already has light, power and air handling units, and modify it so that it can accommodate our needs.’ We are seeing a little bit more of that than we had traditionally.”
Another emerging trend in medical facilities is an insistence to own, rather than lease medical space. “We’ve seen a huge demand for people wanting to acquire their [own] office space,” said Kevin Annis, CCIM, SIOR, principal broker for ArchCrest Commercial Partners. “And with financing as affordable as it has been for the last couple of years. we sell probably 80 percent of the buildings that we’re building as opposed to leasing. The medical office groups now are looking to diversify some of their income as opposed to being just tenants in a hospital. And the medical offices that we are working with are using their office space as a profit center. They own the real estate and then are renting it back to the practice as opposed to just renting it from a hospital and paying rent as a tenant.”
This trend to own medical office space as opposed to leasing, is directly correlated to the supply chain. “We are experiencing supply chain issues significantly,” said Annis. “And so, our construction costs are extraordinary right now. The cost to build right now makes it very difficult to pencil for someone to just be a standard tenant. So that is also why we are seeing people buying because it is more affordable to spend $500 a foot on an office building and own it than it is to have a developer spend it and then lease it back at cost.”
Preparing for the Next Pandemic
Many lessons were learned the hard way during the pandemic. For those in the medical field the need to be prepared for a crisis in advance was predominant of those lessons learned. One major issue that hospitals faced was an inability to provide quality care to patients due to a lack of supplies and a dependency on the supply chain. As a result, many medical facilities have begun stockpiling provisions in the event that the supply chain is squeezed again.
“[Hospitals] are leasing off campus warehouse and flex spaces and trying to get them as close as they can to the hospital to combat the supply chain issues,” said Shapiro. “So, when we have other surges, they have a more effective supply chain management strategy. All hospital systems are now having to address that with either internal warehousing that they control or using alternative sourcing, automation or expanding inventory facilities. They’re getting into the logistics game.”
Another emerging trend as a result of the pandemic has been the initiative to make all hospital rooms ICU convertible. “What we’ve done here at Sierra Medical Center is gone towards universal rooms, which is basically having every room here in the hospital be designed as an ICU,” said Walter Ray, chief operating officer of Sierra Medical Center. “They will be used differently. [For example] if you go in to deliver a baby, the headwalls in both the laboring suite and the postpartum suite after the delivery will have all of the same connections for medical air, oxygen, and suction that you would find in an ICU. If there is a pandemic again, we can then convert all the rooms in this hospital into an ICU. We can use that flexibility where we can go all the way up to an ICU, and we can use it all the way down to a standard post-surgical med-surge bed.”
Medical facility developers are considering patient satisfaction levels like never before. “Whatever they can do to get [patients] in the door with the least amount of challenges is exceptionally important,” said Shapiro. “A lot of developers and facilities are looking for convenient locations for the nearby residents. Aesthetics are [also] playing a major role now. What will help draw patients? What will help retain patients? You want buildings that feel safe and modernized with security. You want light and airy common areas like when you’re walking into the building, in hallways and within the suites. They are always trying to infuse as much natural light as possible. A lot are also adding valet amenities like coffee bars and organized transportation for seniors.”
Stand-alone office buildings have also become increasingly popular in order to avoid packed parking lots for patients. “We specialize in a garden office environment, which is a stand-alone office building, and it has its own front entrance,” said Annis. “And we have seen a huge demand in medical office space for our development because tenants nowadays are trying to leave the multi-tenant office and medical space where they have their own parking for their own building. They can just walk in and out as opposed to having a communal lobby and elevator. The stand-alone building actually has been hugely successful and in big demand.”
Some hospitals are also incorporating more private rooms for patients to not only ease possible concerns of spreading infection, but also to enhance the patient experience. “New builds across the board are going to be private rooms or single rooms,” said Ray. “Because you’re not sharing anything with anybody, you don’t have visitors coming to bug you. That trend is going to be more to the private experience. More towards a hotel type experience. Like for us, we [offer] room service instead of the tray line. [We can tell patients] ‘Here is your private room. It’s got great views of the Sierra Range or the Virginia Range. You may not have selected to be here, but while you’re here, we hope you enjoy your stay.’ We have gone as far as incorporating blackout curtains. We do everything we can to drop the noise and the disruption so that you can go into resting more often. It is definitely getting more patient centric, and we are building to that standard.”
There has been a significant increase in the use of technology in medical facilities in recent years. In particular, advancements were made during the pandemic as a means of mitigating the need for social distancing. “There are a lot of technological advancements that have come about as a workaround for COVID like digital front doors and the advances of telemedicine,” said Garcia. “There is more dependency on telemedicine than there was three years ago. Consultations, monitoring and electronic health records are all more common for health care facilities, and they weren’t previously.”
Significant advancements in sanitation have also been incorporated into medical facilities. “We’ve equipped the ED and OR rooms with indigo lighting,” said Ray. “Indigo lighting is just below UV on the light spectrum. If you are in our ER today, you could walk to a room that has a blue looking light in it and what it’s doing is a certain level of disinfection. It is not pure UV, but while it’s sitting there, the light switches from white spectrum to blue spectrum. When it cannot detect a person in there, it doesn’t hear anybody and doesn’t see anybody, it goes to this blue spectrum and it’s cleaning. We have done the cleaning on our end, and it’s continuing to clean.”
Medical facilities are also investing in cleaning robots. “I think you’re seeing a lot more in hospitals across the country that they’re investing in UV robots,” said Ray. “The ones we have, [allow us to] map the whole facility. When we’re done in an operating room, an emergency room or a patient room, and we need to turn it over, as part of the the terminal clean process, we just push a button on this robot, say, ‘Go clean room number 213.’ It drives itself down there and it goes in the room and does its UV cycle and kills any other bacteria. It kills all the germs, and it does that on its own. You’re seeing a lot more hospitals invest in that technology, whether it is selfdriving robots or robots that you push into a room and push a start button and leave the room and it starts up.”
In a post-COVID world, it’s become apparent that there’s a new normal and for medical facilities, this is especially true. Although telehealth options are a great outcome of the pandemic, allowing patients the convenience of speaking to a medical expert from the comfort of their home, patients are back in the buildings. This has resulted in a demand for office space in the face of a significantly delayed supply chain and rising inflation that continue to present challenges. But those who are attempting to meet the demand for medical facilities have gotten creative. They are repurposing space, seeking to own instead of lease, and creating environments that take patient satisfaction to new levels. Yes, there’s a new normal – but in a post-COVID world, the patient is at the center of medical facilities.