INSIDE R ising materials and labor costs have had an impact on all kinds of construction in recent years, but in the specialized realm of ten- ant finish for medical office build- ings, those costs are even more pronounced than in typical office buildings, driving up the overall cost to make a space ready for patients. But developers and landlords who can navigate the complicated waters of tenant improvement for medical office buildings in a cost-effective way that also best serves physicians and patients still stand to gain, thanks to con- sistently high demand for these properties in metro Denver. Tenant improve- ment costs for medical office buildings are on the rise, reaching an estimated $120-$150 per square foot (or more, depending on the practice type and specialty), compared to $100- $130 per sf just two years ago, to build out a medical space from shell condition when the building is brand new. Retenanting second- generation space also is costly due to changes in patient care and technology that result in the func- tional obsolescence of older space, often resulting in the complete gut and rebuild of the existing suite. Medical office buildings natu- rally come with higher tenant improvement costs, due to the nature of the buildings’ use. Even general practices that don’t use highly specialized equipment are more expensive to build out than a typical office space because of the finishes that are used and the unique needs of a medical prac- tice. For example, the increasingly common open office floorplan that Outdated electrical equipment labels puts facilities, people at risk Incorporating a healthy animal-people dynamic in older adult communities Up to date Doghouse PAGE 13 PAGE 16 Please see Page 16 January 2020 Stephani Gaskins Associate, CBRE Healthcare Real Estate Brokerage Services Quick, convenient retail is influencing how health care is delivered Follow the leader PAGE 9 Medical office costs up but sector’s still strong The Denver metro area saw the average asking lease rate for medical office buildings reach nearly $29 per square foot in 2019.