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Sound Fundamentals Driving Medical Office Construction M E D I C A L O F F I C E B U I L D I N G S (MOBs) have become much more than an afterthought for investors in more conventional segments of the real estate market, National Real Estate Investor (NREI) magazine reports. Some of the fundamentals making that so, according to industry experts who spoke with NREI, include: + Stability. MOB pricing has risen gradually — by an average of roughly 50 percent — during the past five years, and the sector does not appear to be primed for a downturn, according to Mike Hargrave, Principal at Maryland- based medical real estate research firm Revista. + Growth. MOB development is taking place nationwide. The approximately 22 million square feet in medical office construction in 2018 was "the high-water mark going all the way back to 2008," Hargrave adds. + Realism. Construction is not merely speculative. MOB and outpatient care facility develop- ment are tracking closely with actual demand, according to Mindy Berman, Managing Director of Healthcare Capital Markets at JLL, a real estate services firm whose Americas headquarters is in Chicago. n — Steve Barrett Key Factors in Micro-Hospital Development A N E M P H A S I S O N access to care and lower costs has driven phenomena such as telemedicine and healthcare reform. It is also a significant part of discussions about building micro-hospitals. Micro-hospitals are far smaller than conventional hospitals, housing a few inpatient beds, an ER, pharmacy, imaging, lab and other services, such as primary care and surgery, notes Becker's Hospital Review. Scores of these facilities have gone up around the U.S. in recent years. " [ M ] i c ro - h o s p i t a l s re p re s e n t a potential area of growth, particularly in locations where inpatient and emer- gency services are needed but demand is insufficient to warrant construction of a new, large acute care facility," write Victor McConnell, MAI, ASA, and Anne McGinn, both of Nashville, Tennessee- based healthcare business valuation firm VMG Health. However, it is important to take into account the value of such a facility on the market. "Due to the specialized construction of micro-hospitals, the potential 'dark' or 'as vacant' value of the real estate can be significantly below development cost," the authors add. n — Steve Barrett Millennials Liken Health Care to Retail, Survey Finds A S U R V E Y F I N D I N G that millen- nials view obtaining medical care through an online retail prism may have implications for future construction of healthcare facilities. For example, millennials use walk-in clinics at more than double the rate of baby boomers — 30 percent vs. 14 per- cent, according to the Employee Benefit Research Institute (EBRI)/Greenwald & Associates Consumer Engagement in Health Care Survey. In addition, telemedicine interests millennials at much higher rates than boomers — 40 percent vs. 19 percent. Pew Research Center notes that millennials — defined as ages 23–38 — are expected to surpass baby boomers as the United States' largest adult generation sometime in 2019. Boomers are defined as ages 55–73. EBRI, a nonprofit, nonpartisan orga- nization, and market research firm Greenwald & Associates are based in Washington. n — Steve Barrett 2 6 2 6❱❱❱❱❱ M E D I C A L R E A L E S T A T E