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Page 12 — Health Care Properties Quarterly — April 2017
Market Update
I think everyone would agree
that Colorado’s real estate
market has more than
rebounded from the 2007-
2008 recession. Denver is the
fastest-growing city in the country.
I’ve lived in Colorado my entire life.
I remember driving from Boulder
down to Sheplers Western Wear –
past Colorado Avenue – there was
nothing along Interstate 25 except
for Gates Rubber Co. You really
didn’t see much until you arrived
at the store. After shopping at She-
plers, we would go next door for
lunch at the Hungry Farmer. That
was the extent of our options.
Today there is barely a buildable
site left in the Denver Tech Center.
Downtown has added unbelievable
amounts of new construction – lofts,
retail and office space. I could go on
and on about what’s been built. The
same holds true for Cherry Creek as
well as other parts of Denver.
The situation for medical office is
no different. Hospitals have sprung
up, and close to them, medical office
buildings. Overall, Denver’s medical
office market is robust – numerous
health care operators breed a com-
petitive marketplace.
Colorado Springs and Pueblo are
a different animal than Denver.
We’ve seen the construction of
many standalone emergency medi-
cine facilities, by UCHealth as well
as operators out of Texas that focus
solely on such facilities.
In addition to UCHealth and Cen-
tura, DaVita has become a major
player in the Southern Colorado
market. A long-
time specialist in
dialysis centers, it
recently acquired
Colorado Springs
Health Partners as
well as Mountain
View Medical, giv-
ing the company
a large piece of an
integrated, multi-
specialty practice
market.
All three of these
juggernauts have
been actively pur-
chasing physician practices. These
physician groups often co-locate on
facilities owned and operated by the
acquiring health systems.
Freestanding medical office build-
ings are enjoying strong occupancy
rates all over Colorado Springs –
many are well past 90 percent occu-
pied. A few standalone facilities are
under construction now, all owned
by the end-users. A group of inter-
nists up at Northgate, led by Dr. Rick
Vu, is building a 14,000-square-foot
building off of East Woodmen Road
scheduled for completion at the end
of 2018; it is reportedly 100 percent
leased. Additionally, a group of den-
tists is building a 24,000-sf facility in
Northgate.
Children’s Hospital Colorado will
be occupying a large building soon
to be under construction on Memo-
rial’s north campus, set for comple-
tion in 2020. Once again, this space
will be for providers working in the
UCHealth system.
Boldt, a developer out of Milwau-
kee, was quite successful on a joint
venture project with Centura Health
at Lake Avenue and Venetucci Bou-
levard, at the south end of Colorado
Springs. The building is 100 percent
leased; in the building next door,
Colorado Springs Orthopedic Group
has occupied 20,000 sf, nearly half of
the facility. Boldt’s facility with Cen-
tura and the Tri-Lakes YMCA, just
south of Monument, still has space
available.
We will probably not see many
speculative MOBs built in Southern
Colorado because the demand is not
quite as high as in other cities along
the Front Range. Our top-end medi-
cal office lease rates are $20 to $22
per sf triple net, and to build a new
building out of the ground, rents
need to be in the range of $26 to $28
per sf triple net to justify the cost of
new construction.
There will, however, still be a
demand for stand-alone MOBs. We
can’t forget physical therapists,
physiatrists, podiatrists, osteopaths,
holistic medical providers and chi-
ropractors. These providers will
all need medical office space, as
patients increasingly seek services
from complementary and alternative
practitioners.
When will the next speculative
MOBs come on line in Southern
Colorado? We are now projecting
that timeline is likely 2019 or 2020.
At some point, all the vacant space
will be leased, and any large medi-
cal group will not have options in
this market. When that time comes,
somebody is just going to have to
swallow the pill and commit to the
higher rental rates to have new
space.
In conclusion, market conditions
are improving and lining up to be
ripe for a new MOB, but the time to
build is not quite yet.s
Blending Form into the Function of Your
Healthcare Facility
1660 Lincoln Street, Suite 100 l Denver, CO 80264 l 303.861.4800 l
Experts in Design Mixology
Ted Link
Broker/owner,
Cascade
Commercial Group,
Colorado Springs Boldt teamed with Penrose-St. Francis Health Services, part of Centura Health, and The
YMCA of the Pikes Peak Region to bring the Tri-Lakes Health Pavilion to Monument.