CRE INVESTORS SHOULD LISTEN TO ADVICE FOR HEALTHCARE SYSTEMS
Published on Thursday, April 25, 2024
The delivery systems manage large portfolios of real estate and are facing the same environment. Plans they make could be good guidance for CRE investors.
The healthcare industry faces challenges and market perturbations. That’s having impacts on CRE property owners and investors. A shift from inpatient to outpatient treatments, and the rapid development of outpatient office buildings, are an important example.
Then there is a report from DPR Construction, a major self-performing general contractor (they largely have all in-house crews rather than using subcontractors), that caregivers find themselves having to consider scale to “evaluate the best path forward to support patients and caregivers, and create financial sustainability.”
The healthcare systems manage larger portfolios of real estate. DPR suggests four different ways to manage those holdings:
The first type, rationalized, is one “where existing real estate assets become highly streamlined, right-sized to changing strategic and operational objectives of the health system, and continuously monitored for their performance and returns to the system.” Owners modify their portfolios to recognize that real estate is a major expense. Rationalizing the space — resizing assets, whether up or down, to match strategic and operational goals — becomes the driving approach. Owners push to monitor performance and keep finding efficiencies and savings.
Redistributed means “systems begin to source partners and incorporate community nodes of care into their real estate portfolios, potentially moving to models of care hosted in environments that may be managed by others, such as retailers, workplaces, schools and more.” The analysis added, “Shifting to an expansive view of care, not only through the disease lifecycle but throughout a patient’s life, requires vertical integration (within the health industry) and horizontal integration (across health and other industries) of a broader set of venues and partners over a longer time frame.”
Re-envisioned means “providers may supplement a multi-channel technology platform that guides patients toward wellness and resources with an extensive physical network of community care nodes.” This includes using remote and in-person to create a set of delivery methods that can, together, help patients. “The omnichannel approach is supported by buildings designed as multisensory ecosystems whereby healthcare is integrated, unifying the home, health system and digital environments into a single experience.”
And then, the refocused portfolio “would shift the paradigm of the hospital from the anchor of the health system to the final and highest-acuity specialty center. In this case, hospitals operate as specialist hubs, portfolios evolve to include an ecosystem of digital and community nodes, a reduced number of ambulatory centers, and access to a number of post-acute sites.” There is use of a number of outpatient centers, often with “super-specialty care” and digital services.
The important here is for CRE property owners to understand the specific strategies that care providers in their areas are using. That will have an impact on how the care infrastructure of an area will work. There might be a pull-back on the number of physical sites, an expansion of them, or the use of a broad set of retail, office, and specialty centers that feed into an acute hub, along with digital services to lessen need on expensive real estate. The infrastructure strategy directs how investors and owners can make their own plans.
Then there is a report from DPR Construction, a major self-performing general contractor (they largely have all in-house crews rather than using subcontractors), that caregivers find themselves having to consider scale to “evaluate the best path forward to support patients and caregivers, and create financial sustainability.”
The healthcare systems manage larger portfolios of real estate. DPR suggests four different ways to manage those holdings:
- Rationalized portfolios
- Redistributed portfolios
- Re-envisioned portfolios
- Refocused portfolios
The first type, rationalized, is one “where existing real estate assets become highly streamlined, right-sized to changing strategic and operational objectives of the health system, and continuously monitored for their performance and returns to the system.” Owners modify their portfolios to recognize that real estate is a major expense. Rationalizing the space — resizing assets, whether up or down, to match strategic and operational goals — becomes the driving approach. Owners push to monitor performance and keep finding efficiencies and savings.
Redistributed means “systems begin to source partners and incorporate community nodes of care into their real estate portfolios, potentially moving to models of care hosted in environments that may be managed by others, such as retailers, workplaces, schools and more.” The analysis added, “Shifting to an expansive view of care, not only through the disease lifecycle but throughout a patient’s life, requires vertical integration (within the health industry) and horizontal integration (across health and other industries) of a broader set of venues and partners over a longer time frame.”
Re-envisioned means “providers may supplement a multi-channel technology platform that guides patients toward wellness and resources with an extensive physical network of community care nodes.” This includes using remote and in-person to create a set of delivery methods that can, together, help patients. “The omnichannel approach is supported by buildings designed as multisensory ecosystems whereby healthcare is integrated, unifying the home, health system and digital environments into a single experience.”
And then, the refocused portfolio “would shift the paradigm of the hospital from the anchor of the health system to the final and highest-acuity specialty center. In this case, hospitals operate as specialist hubs, portfolios evolve to include an ecosystem of digital and community nodes, a reduced number of ambulatory centers, and access to a number of post-acute sites.” There is use of a number of outpatient centers, often with “super-specialty care” and digital services.
The important here is for CRE property owners to understand the specific strategies that care providers in their areas are using. That will have an impact on how the care infrastructure of an area will work. There might be a pull-back on the number of physical sites, an expansion of them, or the use of a broad set of retail, office, and specialty centers that feed into an acute hub, along with digital services to lessen need on expensive real estate. The infrastructure strategy directs how investors and owners can make their own plans.