Why More Developers May Choose to Co-Locate Senior Housing, Medical Office

Health care providers are increasingly embracing creative real estate strategies, paving the way for more medical office buildings to co-locate alongside senior living communities.

Many developers and owners of medical office buildings are moving away from hospitals and instead opening their doors closer to where patients live, according to recent research report from professional services firm JLL (NYSE: JLL). In turn, this has made it more likely that medical office buildings and senior living communities become neighbors, or even share the same space.

“I think that we’re definitely going to see a trend toward senior housing co-locating with other uses, and medical office buildings would certainly be one of those other uses,” Charles Bissell, a managing director at JLL, told Senior Housing News. “It’s a huge positive for senior living providers to have health care services nearby, as it gives the residents peace of mind and certainly helps create demand for that senior living.”

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Data collected by real estate research firm Revista and cited by the researchers shows that, by the end of this year, nearly three quarters (73%) of all medical office building construction projects underway will be off-campus locations. That’s a stark difference from 2014, when just 56% of medical office building projects under construction were located off of hospital campuses.

“Now more than ever, health care providers of all sizes are … using real estate to serve patients more efficiently and effectively,” the research report noted. “The manifold benefits of more diverse offerings for care are fueling a swell in off-campus locations that, together with future-friendly health care delivery, help boost revenue and trim costs.”

At the same time, older adults are contributing to the lion’s share of health care spending, with 73% of such spending in the U.S. coming from the the 50-or-older demographic. As seniors’ health care needs grow, logic dictates that there will need to be more medical office buildings, health care-anchored retail centers, surgery centers and other specialty buildings to serve those needs, the report explained.

Meanwhile, as senior housing providers are also seeking out creative new locations such as mixed-use developments, it makes sense that some might find themselves sharing space with a medical office building.

“You could have a building or a campus with several different uses, like a medical office component, some senior rental housing, and even have potentially a small hotel component,” Bissell said. “All those uses can be complimentary in certain locations.”

Clustering senior living communities and outpatient medical facilities could also open up more opportunities to develop both property types in a wider variety of markets.

“In some instances, they’re figuring out ways to co-locate facilities in high-density locations where it would be otherwise difficult to do either a freestanding medical office building or a senior living community,” Bissell added. “But you combine the two into a more dense-use location, and the economics can start to work.”

It is important to note that hospitals don’t seem to be going anywhere, as hospital construction starts are actually on the rise this year. Still, the trend of medical office buildings cropping up alongside senior living communities should continue in the years ahead, Bissell added.

Written by Tim Regan

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