New space sells for record low price ($33 per SF), located near Dublin Methodist hospital

A 16,000 square foot condominium suite located across from the hospital just sold for $33 per square foot.

The property was built by a private developer with asking prices $150+ per square foot, but the lack of sales forced a situation where the lender had to take the property back.

After the lender marketed for about a year, they set a deadline to close by the end of year.

With the end of the year nearing and no contracts in place, they decided to ask for best offers and accept the highest.

This price point tells us what a speculative investor is willing to pay for a space.

Unlike investment sales (where tenants are in place) or user sales (where the buyer is going to use some / all of the building) this speculative purchase scenario is not something we’ve had much data on.

This low price is indicative of the investor’s risk. He will need to find tenants (which could take an unknown period of time) and will need to contribute to the build out costs (not a totally known cost).

The carrying costs such as taxes and insurance will reduce his return, so he is highly incentivized to lease or sell the space quickly.

Despite these risks, this is likely a tremendous opportunity for the investor.

He can set his asking rents and prices substantially lower than the rest of the nearby market and still make a decent profit.

For the investor, as well as whomever buys or leases from him down the road, this should be a win-win.

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Q3 2011 Medical Office Trends

Presenting Medical Office Trends via video

Veteran Salute, and my old ship is hosting Michigan State - UNC Basketball!

I wanted to take a minute to salute and thank our veterans. My heart especially goes out to those who have served over the last ten years.

Although I am a veteran, the sacrifice I made don’t compare what most of them had to do.

I can’t help but to feel a twinge of pride knowing that I’ll be able to see my ship tonight as the USS Carl Vinson hosts the Michigan State – UNC basketball game.

I lived on board for 4 years… I know the crew will love the event.

It’s a well-deserved break, and kudos to those who came up with the idea and executed it.

If you happen to have a minute tonight, it could be worth a look… it’s certainly something you don’t see every day.

Link:
http://www.freep.com/article/20111111/SPORTS07/111110425

Massachusetts Tries to Rein In Its Health Cost

In the continuing saga of healthcare reform, it appears that one of the early adopters of a new mandated healthcare coverage model is rethinking and may reengineer their approach based on the unsustainable results that have stemmed from the program's launch in 2006. Read the full New York times article here:

http://www.nytimes.com/2011/10/18/us/massachusetts-tries-to-rein-in-its-health-care-cost.html?_r=1&ref=todayspaper

NY Times: Medical practices work to serve patients and the bottom line

Decent overview article from the NY Times that includes a snippet from a local dental practice and a variety of medical specialties throughout the country.... Link at
http://www.nytimes.com/2011/09/08/business/smallbusiness/medical-practices-keep-eye-on-the-business-side.html?_r=1

- Posted using BlogPress from my iPad

Medical Office Today's Spotlight on Columbus

I'm pleased to have provided the following article to Medical Office Today profiling the Columbus market:

Over $2 billion in healthcare-related projects are underway in Central Ohio, with most of the activity related to hospitals’ on-campus expansions and increasing their suburban presence. Hospitals and physicians alike are working to improve margins in what has been a challenging economy and healthcare environment...
(Click for Full Article at Medical Office Today)

The best study I've seen about healthcare changes their impact on medical office demand

"The Outlook for Healthcare" was published by Urban Land Institute and Seavest Inc... I've found it to provide the best one-stop source for understanding the dynamics of the market and the most likely expected outcomes as they relate to demand for new facilities.

I think they hit almost all of the nuances and they're able to do so in less than 40 pages. I'd make a comment about what it means when simplification is "just" 40 pages but it's probably better if I don't comment. Still, it's a fairly easy read and insightful.

The entire study can be downloaded here: The Outlook for Healthcare

The Cardinal Orthopedic Institute Buys Near Polaris

The Cardinal Orthopedic Institute has just purchased a 19,694 square foot shell building located near the intersection of Polaris Parkway and Cleveland Avenue. The building (560 N Cleveland Avenue) has been vacant since it's construction in 2007. Although the asking prices for this project were once north of $150 per square foot, Cardinal was able to purchase at the discounted rate of approximately $102 per square foot.

I assume this site will serve as a point of consolidation for the two Westerville practices they acquired in the first half of 2010, Westerville Orthopedics and Northeast Orthopedics.

I anticipate that sales at this discount rate and lower will continue as many commercial real estate owners still languish under the burden of vacant buildings. For hospitals and physicians who have a need for space, there are a number of opportunities to purchase vacant buildings at 50% or less of original pricing.

Good article on Mt Carmel's Grove City emergency care center

This has made headlines recently, both in the medical community and the commercial real estate community. The article below from This Week news does a good job of providing a "deeper dive" into some of the details.

Mount Carmel plans to build emergency care center

Grove City is preparing for the arrival of a 24-7 emergency room facility to be run by Mount Carmel Health System. Mount Carmel is in contract with Mid-America Racing Association Inc. to purchase 112 acres to develop its healthcare services at the site of the former Grovebrook Golf Club off state Route 665.
Full Story linked: This Week News re Mt Carmel emergency care center

Moving Dirt- A Litmus Test for the Medical Office Market

It's no mystery that the bulk of the health care related developments around Central Ohio are revolving around the hospital systems and their campus and suburban expansions. With over $2 billion in projects underway, there's no other way to categorize that segment than "booming"

It's more difficult to describe is the status of independent physician practices related to new space and new medical buildings. Despite some of the recent challenges and uncertainty in health care, some notable physician led projects are moving forward and others have been recently completed.

Hand and Microsurgery Associates has broken ground on their new building in immediate proximity of Polaris Mall. The 45,000 square foot building will incorporate a surgery center, space for Hand + Micro, and up to 15,000 square feet of additional space is available. The land at this premium location is expensive, and this is reflected in the rental rates- they're asking $18.45 per SF NNN.

OrthoNeuro has completed their 60,000 SF facility in New Albany, which also has a major ASC component in addition to housing space for OrthoNeuro. About 19,000 additional SF is available to lease at an asking rate of $17.95 NNN.

The rates for these buildings are an uptick from pricing for new medical office space a few years ago when rates for most new build spaces were hovering around the $16 NNN mark, although it's worth noting both of these are premium locations.

There is activity in these new buildings, and their ability to lease up will be an interesting indicator of the medical office market going forward, particularly as it relates to new buildings with speculative space available.

Work underway near Polaris Mall MOB

OhioHealth overseeing CVS MinuteClinics... Wal-Mart tweeting for medical users in their stores

This trend has been talked about for a few years, but is now really gaining some steam, with CVS and Wal-Mart taking a step forward....

First, per Business First... OhioHealth physicians will be medical directors for the CVS Minute Clinics throughout Central Ohio... Link below:

http://www.bizjournals.com/columbus/news/2011/06/10/ohiohealth-to-oversee-central-ohio-cvs.html


And, yesterday Wal-Mart twittered "Are you seeing medical users expanding in retail-oriented centers? We're looking for similar users inside our stores."

Curing Allergies with Dr Summit Shah - Segment from WBNS 10 TV

I had the great pleasure of working with Dr Shah in helping him navigate the wild frontier of commercial real estate as he began to establish his new practice. He wasted little time in getting up and running, and I'm pleased to see that he's getting some well deserved publicity, most recently on WBNS 10 TV: Cure for Allergies

He was gracious enough to write a letter of reference for helping him out. In the letter, he indicated that he felt as though we were going into practice together. I can say the feeling is mutual and wish Dr. Shah all of the best in his future endeavors.

Q4 2010 Quick Summary Of Medical Office Leases And Sales

Columbus medical office sales and leasing have continued an upward trend.

Office investment and sales activity has been consistent with Q3 performance, both quarters being substantially better than recent memory. Investment sales include 921-A Jasonway (Cleveland Clinic Star Imaging as tenant) and another substantial non-public investment sale, both indicators of increased investment sales activity. Owner occupant sales fourth quarter include the purchase of the 7,387-square-foot building at 2856-72 West Broad St. by D+P Holdings and Hilliard Pediatrics’ purchase of 7,359 square feet within a 14,000-square-foot facility for $717,500.

The Leasing activity market has picked up as evidenced by a more broad based increase in leasing activity, as opposed to recent quarters where the market was impacted more heavily by a select handful of transactions. Q4 leases include:American Kidney Stone Management / Pathology Labs leased 2940 SF at 2100 Marble Cliff Office Park.... Dr Tolani leased 2600 SF at 5925 Cleveland Avenue... Columbus Endocrine Consultants leased 4528 SF at 6790 Perimeter Drive across from the Dublin Hospital... Solis Women’s Health Care leased 5651 SF at 974 Bethel Road.

Additional recent activity including a focus on Dublin and some hospital activities are included in previous blog posts below.

For a full market report, please email Paul Heiserman with Colliers Healthcare Services Group, paul.heiserman@colliers.com

Dublin Medical Submarket Moves- Finally!

In an area often referred to as an example of over-built medical office space, leases and purchases have absorbed some of the space and plans are in the works for a new building. Professionals for Women's Health has acquired a condo across from DMH and Columbus Endocrine Consultants is in another park across from DMH. This is on the heels of a year in which a number of other vacant spaces in the area have been absorbed by moves including Nationwide Children's Hospital's presence in the hospital MOB.

So, with this submarket looking a lot less bleak than in recent years, Riverside Radiology and Interventional Associates has partnered with Hplex to propose a 29,800 square foot new build directly across DMH. The proposed rents are $16.95 per square foot, which includes a robust $60 per SF in tenant improvement allowance. The property includes 5 parking spaces per thousand square feet.

Nationwide Childrens Adds To Inertia of East Polaris Medical Submarket

In what I've considered to be the strongest cluster of medical office activity in the region, Nationwide Children's Hospital has purchased 10.633 acres for $1,920,000 total ($180,570 per acre). As the picture below indicates, this new purchase is adjacent to their current facilities by North Cleveland Avenue.

As a general rule of thumb, 10. 6 acres could accomodate up to 106,000 square feet of medical office space. With this particular site, the woods and terrain adjacent to the creek prevent the site from being developed to that capacity, and according to Business First they're planning a 46,000 square foot facility.
Full article from Business First is located at: http://www.bizjournals.com/columbus/print-edition/2010/12/31/childrens-adding-surgery-at.html

This purchase took place December 15th, 2010 and, along with OhioHealth's move to add 40,000 square feet off of their Westerville campus on Polaris, indicates that big moves are still taking place in the area. This area is also of interest to some other larger practices, who are quietly looking for the right opportunities.

Stay tuned...

    Aerial from Delaware County Auditor