Business Specialties
Development
Jul 17, 2009
By: Tonie Auer, Contributing Editor
In a prime example of how medical office properties garner investor demand by exhibiting considerable resistance to the economic downturn, Atlanta-based commercial real estate firm Carter formed a strategic alliance with Align Healthcare, which provides planning and program management services to hospitals and health systems, to develop a slate of new Healthcare facilities.
The alliance enables Carter and Align to jointly market and execute planning and facility development for healthcare institutions throughout the Southeast and across the nation, according to a statement released from the companies.
The medical office segment is currently holding up better than other commercial real estate product types. According to a first-half 2009 report by Marcus & Millichap Real Estate Investment Services, much of the economic resilience tempting investors can be attributed to the positive state of the health care industry. The nation spends more than $2 trillion on health care annually, more than double U.S. expenditures on food, and health care spending is projected to exceed $3 trillion by 2013.
Medical outlays have increased by an annual average of 7.7 percent over the past 10 years and now comprise 17 percent of GDP, the Marcus & Millichap report stated.
“The rise in spending is facilitated by growth in the number of residents over 55 years old, a group that will expand nearly 20 percent through 2013. Furthermore, people will continue to seek medical care for illness and preventative reasons, despite a recent slowdown in costly elective procedures. Another demand driver for medical office space has been the shift of medical care from an inpatient to outpatient focus. Hospital construction costs have skyrocketed to an estimated $1 million per bed, prompting facilities to downsize,” the report stated.
In the past, hospitals often supported 800 beds, but many new facilities contain fewer than 100 beds, necessitating more off-site services. As such, care at physicians’ offices and visits to ambulatory and diagnostic offices have increased significantly in recent years, generating demand for space, according to report information. Going forward, these trends are expected to gain momentum as hospitals continue to scale back on exportable patient care, further buttressing demand for medical office space, the research report stated.
The goal of the alliance between Carter and Align is to provide healthcare clients with a comprehensive spectrum of real estate services from initial strategy through full-project implementation. Services include strategic and business planning, health network planning, facility planning, peer review studies, program management, facility ownership/development, land acquisition and other real estate transactions, leasing and asset/property management.
“We view our alliance with Align Healthcare as part of a long-term strategy to fortify our capabilities in the healthcare arena,” Carter president Scott Taylor told CPN. “It will enable us to better serve our clients and be positioned for growth in the development of healthcare facilities and hospitals. Healthcare is one of the strongest segments of commercial real estate, and demand for healthcare facilities will continue to be high. Our alliance with Align will afford both parties higher visibility and penetration in the healthcare real estate market.”
The Carter-Align alliance will be housed in Carter's headquarters at 171 17th St. in Atlanta.
Nationally, demand for medical office assets remains strong, although transaction levels in 2008 were down 15 percent from those recorded a year earlier. Cap rates have climbed over the past year to the high-7 percent to low-8 percent range, fueled by tightening underwriting standards and adjusting buyer expectations. At the close of 2008, the median price was up 1 percent from the previous year at $210 per square foot, according to the Marcus & Millichap report.
By: Tonie Auer, Contributing Editor
In a prime example of how medical office properties garner investor demand by exhibiting considerable resistance to the economic downturn, Atlanta-based commercial real estate firm Carter formed a strategic alliance with Align Healthcare, which provides planning and program management services to hospitals and health systems, to develop a slate of new Healthcare facilities.
The alliance enables Carter and Align to jointly market and execute planning and facility development for healthcare institutions throughout the Southeast and across the nation, according to a statement released from the companies.
The medical office segment is currently holding up better than other commercial real estate product types. According to a first-half 2009 report by Marcus & Millichap Real Estate Investment Services, much of the economic resilience tempting investors can be attributed to the positive state of the health care industry. The nation spends more than $2 trillion on health care annually, more than double U.S. expenditures on food, and health care spending is projected to exceed $3 trillion by 2013.
Medical outlays have increased by an annual average of 7.7 percent over the past 10 years and now comprise 17 percent of GDP, the Marcus & Millichap report stated.
“The rise in spending is facilitated by growth in the number of residents over 55 years old, a group that will expand nearly 20 percent through 2013. Furthermore, people will continue to seek medical care for illness and preventative reasons, despite a recent slowdown in costly elective procedures. Another demand driver for medical office space has been the shift of medical care from an inpatient to outpatient focus. Hospital construction costs have skyrocketed to an estimated $1 million per bed, prompting facilities to downsize,” the report stated.
In the past, hospitals often supported 800 beds, but many new facilities contain fewer than 100 beds, necessitating more off-site services. As such, care at physicians’ offices and visits to ambulatory and diagnostic offices have increased significantly in recent years, generating demand for space, according to report information. Going forward, these trends are expected to gain momentum as hospitals continue to scale back on exportable patient care, further buttressing demand for medical office space, the research report stated.
The goal of the alliance between Carter and Align is to provide healthcare clients with a comprehensive spectrum of real estate services from initial strategy through full-project implementation. Services include strategic and business planning, health network planning, facility planning, peer review studies, program management, facility ownership/development, land acquisition and other real estate transactions, leasing and asset/property management.
“We view our alliance with Align Healthcare as part of a long-term strategy to fortify our capabilities in the healthcare arena,” Carter president Scott Taylor told CPN. “It will enable us to better serve our clients and be positioned for growth in the development of healthcare facilities and hospitals. Healthcare is one of the strongest segments of commercial real estate, and demand for healthcare facilities will continue to be high. Our alliance with Align will afford both parties higher visibility and penetration in the healthcare real estate market.”
The Carter-Align alliance will be housed in Carter's headquarters at 171 17th St. in Atlanta.
Nationally, demand for medical office assets remains strong, although transaction levels in 2008 were down 15 percent from those recorded a year earlier. Cap rates have climbed over the past year to the high-7 percent to low-8 percent range, fueled by tightening underwriting standards and adjusting buyer expectations. At the close of 2008, the median price was up 1 percent from the previous year at $210 per square foot, according to the Marcus & Millichap report.
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