CREJ - Journal

50 / 76

Page 2B— COLORADO REAL ESTATE JOURNAL — March 4-March 17, 2015
T he Denver metro
area is experiencing
extremely strong
medical office building and
hospital facility development. In
fact, from 2010 to 2014, MOB
and hospital facility development
outpaced the office market, with
over 5 million square feet of new
product in the area, compared
with 3.7 million sf of office
development during the same
time. Today, Denver remains
fertile ground for medical and
hospital facility development,
with over 2 million sf under
construction or planned for
2015.
Who is behind this
development? Between 2010
and 2014, health systems were
the major catalyst, with over 3.6
million sf constructed. Catholic
Health Initiatives’ Centura
Health led the way with over
1.6 million sf, followed by
SCL Health System (formerly
Exempla) with over 800,000 sf.
Developers were the next largest
group, building over 800,000 sf.
Medical practices finished third,
accounting for approximately
400,000 sf developed.
Development was strongest
in 2011, with 1.7 million sf
constructed, including St.
Anthony Hospital in Lakewood,
operated by Catholic Health
Initiatives’ Centura Health;
Fitzsimons Village 100, developed
by Corporex; and Red Rocks
Medical Center, which just sold
to a private investment group for
$52 million, or $442/sf.
Let’s look more closely at
health care facility development.
Of the 5 million sf of developed
health care space, 3 million sf
were hospital facilities and 2
million sf were medical office
space. Further, on-campus
medical office buildings – those
that are located next to hospitals
– accounted for over 760,000 sf.
This number, combined with 3
million sf of hospital facilities,
equates to over 3.8 million sf
of hospital facilities and related
on-campus MOBs, and 75
percent of the total health care
development in the metropolitan
area from 2010 to 2014.
Several factors account for
the emphasis on on-campus
development. Practitioners and
medical groups often prefer
locations on affiliated hospital
campuses, and these facilities
are in high demand. On-campus
MOBs closed 2014 with a vacancy
rate of 4.29 percent, compared to
an off-campus MOB vacancy rate
of 11.67 percent, and the Denver
metro office market vacancy
rate of 14.38 percent. This low
vacancy equates to high demand;
Denver began 2015 with another
1.2 million sf of health care
facilities under construction, and
an additional 1 million sf on the
drawing boards.
With 1.2 million sf already
under construction, 2015 is on
track to be a record year for
development. The vast majority
under construction – 1 million
sf – consists of hospitals or
on-campus MOBs. Notable
developments include the
Department of Veterans Affairs
Eastern Colorado Health Care
campus in Aurora and a Banner
Hospital in Fort Collins. Of the
nearly 1 million sf of proposed
development, approximately half
are off-campus MOBs.
The outlook for health care
development in 2015 is extremely
positive with 2.2 million sf of new
deliveries forecasted – the highest
amount since 2011. New regional
and neighborhood developments
by health systems will lead the
way, and competition for market
share between health systems will
continue to drive new buildings
in growing areas including,
Northern Colorado, north
Denver, Aurora and Denver’s
southeast suburban market.
Aurora is expected to lead the
market in new development in
2015 with continued expansion
at the Anschutz Medical Campus
and with biotech and innovations
companies targeting Fitzsimons.
Other development sector
opportunities in 2015 will include
behavioral health, skilled nursing,
biotech/life sciences and off-
campus medical buildings.
John Gustafson
Director, Newmark Grubb
Knight Frank, Denver
1. Denver Health – 250,000 sf
2. Fitzsimons 200 – 208,000 sf
3. 17th Avenue Pavilions –
94,360 sf
4. Medical Center at
Powerwood – 64,000 sf
5. Castle Rock Adventist,
Bldg. 2 – 60,000 sf
Top 5 Proposed
Developments
This number,
combined with 3
million sf of hospital
facilities, equates to
over 3.8 million sf of
hospital facilities and
related on-campus
MOBs, and 75 percent
of the total health care
development in the
metropolitan area from
2010 to 2014.