Daniel Benedict, founder and president of NYC-based Benedict
Realty Group. “More people are insured, and the days of the
small medical office are essentially over. Having a doctor on the
corner rarely exists anymore; now there are regional and national
chains of hospitals and they require larger floor plates and space
to achieve greater efficiency.”
While the senior generation is having a huge impact on the
growth of the industry, Pontius notes that the Millennial genera-
tion is driving a major shift in the care delivery model. Millennials
want quick access to physicians, he says, adding that they also pre-
fer transparency from providers and insurance companies.
Millennials also like the advances in technology that enable
them to shop online for doctors, research treatment options and
web-based diagnostic health tracking tools, Pontius adds. “Those
are placing a wealth of knowledge and information about personal
care into the hands of the patient.”
As the need for healthcare facilities has increased, so has inves-
tor demand for this category. In the fourth quarter of 2016, BRG
closed on a $60 million, 12-building, medical-office portfolio span-
ning 350,000 square feet in Providence, RI. At the time, the firm
had indicated that it wanted to expand its holdings in the sector.
Including the acquisition, the firm now holds 17 MOBs and over
600,000 square feet on the East Coast.
Benedict told GlobeSt.com at the time that the firm’s future
plans include purchasing $200 million of medical office properties
near top-tier medical institutions along the East Coast, where the
demand for medical office properties is greater than in other parts
of the country and where BRG knows the market.
Benedict isn’t the only one bullish on the sector. Capital One’s
annual survey of healthcare leaders recently found that merger
and acquisition activity is once again expected to be the industry’s
preferred growth strategy in the year ahead. However, nearly one
in three executives (31%) plan to drive growth by launching new
segments or lines of business—a jump from 17% last year. Thirty-eight percent of respondents said that M&A transactions would
drive their growth plans in 2017—down 3% from 2016—and more
than a quarter of respondents (26%) pointed to organic growth
initiatives as their top growth strategy. And nearly half of those
surveyed (42%) expect their capital needs to rise in 2017, a sharp
rise from 25% in last year’s survey.
In addition, the consensus among speakers and attendees at
RealShare Healthcare Real Estate was that as far investment goes,
the sector is a great place to be. Panelist David Lynn, CEO and
chairman of Everest Medical Core Properties, said that, relative to
office, healthcare is still a relatively inexpensive asset class. But he
noted that it isn’t priced as efficiently as office because it isn’t
widely traded. “We still have room to compress in medical office.”
And it isn’t just medical office that’s in demand. Urgent and
acute care centers, retail clinics and standalone emergency departments are replacing primary care physicians and hospital emergency rooms as this generation strives for more efficient and
affordable healthcare options, Pontius says.
As healthcare continues changing, providers are continuing
to seek ways to cut costs. According to a recent GlobeSt.com
article, there has been a flood of construction as major hospital
systems create a new ecosystem of clinics and ambulatory cen-
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