The action in health care real estate is continuing to shift from hospital campuses to off-campus settings and from traditional multitenant medical office buildings to outpatient clinics operated by single health care providers.
The Twin Cities, due to its favorable income and employment demographics, is emerging as one of the top markets in the Midwest for developers seeking to tap these trends.
Nationally, the medical construction pipeline is active and growing, and is showing a distinct movement toward off-campus, outpatient settings. A report released in February by Revista, a Maryland-based real estate analysis firm, found a $97.1 billion medical construction pipeline at the end of 2015, which will likely result in 43.7 million square feet in new construction over the course of the coming year.
While that is about equal to 2015's total, what has changed is the mix. On-campus hospital construction is expected to fall from 30.7 million square feet in 2015 to 19.9 million square feet this year, while off-campus building will jump from 12.9 million to 23.9 million square feet, confirming the trend toward outpatient settings and a continuing push by health care providers to bring services to where people are.
Locally, the same trends are being borne out. A February report from Colliers International indicated off-campus specialty clinic buildings — such as the new TRIA Orthopedic Center in Maple Grove and HealthPartners' new Neuroscience Center now under construction in St. Paul — were dominating the development scene at the close of 2015.
Health care construction levels, Colliers found, continued to be strong in the second half of the year, with 486,740 square feet currently underway and another 697,000 square feet in the pipeline.
That kind of activity has attracted interest from around the country. One new player is Chicago-based HSA PrimeCare, the health care division of HSA Commercial Real Estate. Backed by a new equity fund created through a partnership with USAA Real Estate Co. of San Antonio, HSA is gearing up to pitch Twin Cities health care providers on its services, which includes capital financing, constructing and managing new buildings — or buying existing ones.
HSA PrimeCare President John Wilson said that armed with its new equity fund, the company is scouring 11 Midwestern states for acquisition and new development opportunities.