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Page 14 — Health Care Properties Quarterly — April 2017
Broker Insights
B rokers log countless hours
working with clients who
are in the marketplace
looking to relocate. No mat-
ter if the move is due to
growth or downsizing, brokers try
to educate clients on what the cur-
rent market is bearing from the
beginning. Moving any tenant has
its pros and cons, however, moving
a medical tenant can generate a
totally separate set of issues.
Medical tenants are typically in
a location much longer than other
office tenants, therefore moving is
often very difficult. The first thing
a medical tenant must consider is
its patient base. Such tenants will
question the number of patients
who will follow them if they relo-
cate. They question which patients
are elderly and need assistance,
who relies on public transportation
and who travels a far distance to
come to their office. They will want
to know if moving will add addi-
tional travel time to their patients’
commute. Medical professionals
also are concerned about losing a
percentage of their patient flow. It
is estimated a medical office could
lose up to 5 percent of its patients
simply due to a move. In order to
get a move right, some medical
professionals will ask their broker
to provide mapping and demo-
graphic information. It is extremely
important for a medical profes-
sional to look for a new office with
good referral sources. Referral
sources add to the attractiveness
of the new building and the tenant
feels the building
is vibrant which
allows them to
continue to grow
and prosper.
Outside of
growth and
patient flow, medi-
cal professionals
also are concerned
with the opera-
tional side of the
new office. A
medium-size, pri-
mary care office
can utilize up to 12 exam rooms,
each of which requires plumbing.
Adding plumbing throughout a
medical office can be very expen-
sive. The cost to add plumbing to
a new space starts around $75 per
square foot. Other medical tenants
have different space requirements
to operate their practice properly.
For example, nephrology groups
and surgery centers have a need
for an independent power source,
such as a generator. This is one
reason landlords and tenants look
to each other to contribute signifi-
cant funds to improve the space.
Some medical tenants have been
in their current space 10 to 15
years. The last time they changed
offices the market was different.
Just five years ago we were in a
market in which landlord conces-
sions were readily available. Some
medical tenants hit the market-
place looking for six months abat-
ed rent and a full turnkey tenant
improvement finish. Even with the
special requirements, some tenants
do not feel they are getting a fair
deal if the landlord does not make
them feel wanted by providing
landlord concessions.
The special needs of medical
office users requires you have spe-
cific designations for medical office
buildings. These special require-
ments go into consideration at the
development stage of the build-
ing. There is a need for additional
electrical power for a MOB com-
pared to a standard office building.
The typical MOB will need larger
water taps to accommodate all the
plumbing and water use that is
required. Medical buildings require
more parking stalls for medical
tenants and their patients. The
parking ratio in the Denver metro-
politan statistical area ranges from
four to five parking stalls per 1,000
sf for a MOB. Conversely, a regular
office building typically is required
to have two to three stalls per
1,000 sf for parking. Because of the
special requirements of medical
tenants, there is additional stress
added to the building as well as the
landlord.
When brokers are advising medi-
cal tenants in the market, they
inform them of the changes in the
market up front. There are advan-
tages to being in a MOB and cer-
tainly to having medical tenants
in your building. Medical tenants
are more stable than most other
tenants, and they typically stay in
one location longer and do not like
to move around. The same type
of patients come to the building
consistently for years. This helps
to control foot traffic in and out of
the building. Banks and investors
look at medical buildings as better,
safer investments compared to a
typical office or mixed-use prop-
erty. Although there are changes in
the market, we believe the benefits
outweighs the risk for the landlord
and a tenant.s
Site selection
Development
Real Estate Investment
Energy Planning & Analysis
Facility Assessment
Facility Operations and Maintenance Planning
Healthcare Construction <$1M - $500M +
UCHealth Eye Center
Saint Joseph Hospital
Poudre Valley Hospital NICU
Lutheran Medical Center CU Sports Medicine & Performance Center
Terrence Pace
Broker, health care
solutions specialist,
JLL, Denver
Medical
professionals also
are concerned about
losing a percentage
of their patient flow.
It is estimated a
medical office could
lose up to 5 percent
of its patients simply
due to a move.