Cover Story: Is development back?

Maybe not at peak 2006-08 levels, but healthcare construction is strong

By John B. Mugford

Editor’s note: This is an extended version of the article that appeared in the print edition of HREI.

ConstructionWorkerHas development truly made a comeback in the medical office building (MOB) sector since the throes of the Great Recession? To explore the notion, a group of panelists at the recent InterFace Healthcare Real Estate Southwest conference in Dallas talked about how much development they’re seeing take place, what type of projects are being built, what areas of the country are hot, how healthcare reform and health system consolidations are affecting the business, what developers need to do to adapt and survive, and other related topics.

The panel discussion was titled: “Development is BACK! A 360-degree perspective on today’s healthcare real estate development environment.”
When moderator Todd Varney first learned the title of the panel, he said his first thought was: “Where has (development) been?… I’ve been working my (backside) off for years and I didn’t know it had gone anywhere.”

He added: “I do indeed think it is back, however, as we’ve been hearing this all morning during other panel sessions.”

In addition to Mr. Varney, who is executive managing director of development and acquisitions for Denver-based NexCore Group, the early afternoon panel included executives heavily involved in HRE development:
■ Steve Barry, executive VP of business development and leasing for Jupiter, Fla.-based Rendina Healthcare Real Estate, which has developed more than 7 million square feet of outpatient space;
■ Barry Weinbaum, senior VP of business development for San Diego-based Pacific Medical Buildings (PMB), a 40-year-old company
that owns and manages 52 buildings with about 3.25 million square feet of space;
■ Keith Konkoli, executive VP of healthcare for Indianapolis-based Duke Realty Corp. (NYSE: DRE), a publicly traded, $9 billion real estate investment trust (REIT) whose portfolio comprises about 20 percent healthcare;
■ Joy Hays, an attorney and shareholder with Kansas City, Mo.-based Polsinelli, a law firm with about 74 attorneys nationwide; and
■ Chad Henderson, CEO and founder of Pensacola, Fla.-based Catalyst CRE, an HRE development firm that focuses on ground-up and adaptive re-use projects.

While the panelists did not provide detailed statistics, they agreed, for the most part, that

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