Blog

2 Big Healthcare Trends That Affect Real Estate Decisions

March 28, 2018  |  BY Jon Bonkoski

healthcare trends real estate

Healthcare costs are soaring, government regulation is in constant flux and patient expectations are changing. What do these trends mean for long-term business strategies for healthcare organizations? And how can healthcare providers make real estate decisions when they’re weighing so many unknowns? These are questions our clients are asking every day.

Focusing on Data

As individuals, many of us are tracking more personal health data. Personal fitness trackers measure our sleep, our steps and our heart rates. Healthcare organizations have an eye on that data and are dreaming up new ways to keep patients healthy. In the not-so-distant future, patients will be receiving more care without entering a medical office, just by tracking and sharing their health data.

Healthcare organizations are also using demographic data about their customers, in this case, patients, to make smarter business decisions. At Cresa, we’ve been working with our clients to map where their staff and target market live to make smart decisions about where they should expand and grow. We’re seeing these organizations align their business plans with their real estate plans, connecting the dots with data.

Here’s an example: Some providers are looking at downtown Minneapolis as a primary growth opportunity. More apartments are being built in downtown Minneapolis than any other point in history, mostly targeted to millenials and Baby Boomers. A housing boom downtown means a patient boom downtown. Other providers are focused on expanding outpatient services to strategic suburban submarkets such as Woodbury, Vadnais Heights, Edina, Blaine, and Eagan. Because the location of these new facilities is crucial to their success, we advise our clients to focus on the data to make smart real estate decisions.

Staying Flexible

Across industries, we’re seeing a trend toward flexible real estate that can be repurposed and used in different ways as an organization’s needs change. Healthcare is no different. Because providers are uncertain about when and how they’ll be reimbursed for treatment by insurance companies as regulations shift, they’re making cautious real estate decisions.

Many healthcare providers are holding back on big capital expenditures like renovating or building facilities. And when they do invest, they want their space to be flexible. For example, providers are shrinking waiting areas and lobbies and devoting more space to patient care — the areas that provide the most value to patients. That means the initial capital cost per square foot might actually go up, but the space will be maximized to most efficiently provide value for patients and drive revenue for the provider. We are advising our clients to consider higher tenant allowances (initial investments in customizing a space) to reflect this changing design approach.

Providers are designing those patient-care areas to be adaptable into the future, with patient-care pods that can be easily adapted to accommodate different kinds of care. Another example: Instead of devoting triage space in the ER just for patients with mental or behavioral health needs, providers are building flexible spaces that can be used for all patients, including patients with behavioral health issues.

We’ve even seen healthcare organizations use RFID chips in providers’ employee badges to track where doctors and nurses walk during the course of a shift. That data helps leaders design more efficient spaces, which provides less walking distance between patient areas, allows for more time spent treating patients, and ultimately provides a better patient experience and higher margin for providers. Smaller, more flexible footprints are the future of healthcare real estate.