July 2021 — Health Care & Senior Housing Quarterly — Page 5 HEALTH CARE — TRENDS F or health care providers, real estate can be an afterthought amid the important work of tending to patients. But choosing the right path when it comes to medical office space is critical to maintaining the financial health of a practice. Physician groups and specialty providers who don’t have a big cor- porate apparatus with a real estate arm behind them may find them- selves unsure of how to proceed with securing a space for their prac- tice or how to leverage their real estate to grow their practice. The conventional choices are either to lease or purchase a space outright, but by stepping outside of that box into a different ownership model – like a joint venture partner- ship – providers can find greater flexibility, risk mit- igation and finan- cial benefits. n Reaping the benefits of a strong asset class. Despite the stresses on health care sys- tems and providers during COVID-19, health care properties, as an asset class, are even more desirable than they were before the pandemic, according to several major commer- cial real estate brokerages. A recent report from CBRE shows that capitalization rates have compressed steadily since 2009 to about 6.5% nationwide in late 2020. Health care property sales volumes also spiked at the end of 2020 as private and institutional investors clamored for high-quality proper- ties with rosters full of good credit tenants. In fact, annual investment volume for medical office build- ings suffered the least of any major property type in 2020, according to CBRE. Investment interest is expected to continue as the economy broadly rebounds from the COVID-19 reces- sion. Average asking rents for medi- cal space in metro Denver ticked up slightly in mid-2020 when com- pared to a year earlier, even as the pandemic raged, according to CBRE, demonstrating remarkable resil- ience in the face of a historic threat. n Exploring the path less trav- eled. Both leasing and owning have their upsides. Leasing means far fewer maintenance responsibilities and less risk of the property value depreciating and hurting a prac- tice’s ability to grow. It’s easier to pick up and move to a new location and provides greater flexibility than ownership. Owning offers providers more control over the space and freedom from answering to a third party about the property. It also means Joint venture ownership model provides benefits Gene Hodge Vice president and general manager, Mortenson Please see Hodge, Page 14 The Crosby Cardiovascular Center, developed and built by Mortenson, was the result of a joint venture between Minneapolis Heart Institute and Cuyana Regional Medical Center. A joint venture gave Fairview Lakes Orthopedic Specialty Center the capacity to grow both vertically and horizontally, allowing for construction of a surgery and MRI center at a later date.