Medical Office Building (MOB) trends in Central Texas mirror that of other major Texas healthcare markets – growing populations are driving hospital expansions into suburban areas, and MOBs have rapidly evolving space requirements. CBRE Research continues its coverage of the MOB market throughout the region in this week’s MarketFlash.
With three of the fastest-growing counties in the nation—Bexar, Travis, and Williamson—the Central Texas region is adding new residents rapidly. In San Antonio and Austin, new residents are arriving at a rate of about 150 people per day, according to the U.S. Census Bureau’s 2014 – 2015 data. New neighbors mean a growing need for services such as healthcare, education and infrastructure.
When it comes to real estate, the Central Texas region is seeing hospital expansions and growing investor interest in healthcare and MOB assets. As the recession has shifted investors’ appetites, healthcare property types are no longer an outlier; they have entered into the medical arena as a viable investment option due to increased rents (and their reliable cash flow) that can now rival traditional office assets. With surging population growth and the evolving trend toward a consumer-driven healthcare model (i.e., the expanding urgent care concept), construction and development of these related assets are bound to increase their locational densities throughout office markets.
Location matters: Medical Office Buildings across the region
In a state as expansive as Texas, the 74 miles separating Austin and San Antonio is a relatively small distance, but each market’s healthcare industry is unique.
CBRE Research has identified key attributes unique to each Central Texas metro for MOBs:
Efforts are underway in both markets to improve the healthcare system and manage the demand changes for healthcare real estate. For example, decoupling healthcare services from medical centers allows patients to receive care closer to home. In Austin, communities such as Round Rock and Cedar Park have seen medical office locations sprout with convenient parking for outpatient services. Meanwhile, in an effort to reach more patients along the I-35 corridor, CHRISTUS Santa Rosa Health System recently announced a second facility in San Marcos, located about halfway between San Antonio and Austin.
As major healthcare systems expand, the demand for on-campus and campus-adjacent MOBs (professional physician buildings leased for medical uses) and the importance of tracking these facilities for overall market reporting is on the rise.
For now, changes in the regulatory environment have also created woes for small, privately-owned providers. The six-year-old Forest Park Medical brand situated in high-income, highly insured ZIP codes, often in or near mixed-use developments, was forced to close all of its locations after changes in insurance reimbursement rules. The Forest Park Medical Center hospital in Austin, which was part of the provider’s statewide expansion, was recently sold to St. David’s HealthCare; an acquisition that captured Round Rock’s valuable market share.
Without a doubt, the U.S. healthcare landscape is changing. Along with these changes, the emergence of MOBs as a commercial property sector is expected to grow quickly over the next 10 years. Urban sprawl is drawing hospital expansions to fast-growing residential areas while urgent care facilities and specialist providers are choosing retail centers because of their ease of access. Demographic transformations, such as an aging Baby Boomer cohort and the reluctance of millennials to visit a traditional doctor’s office, has resurrected the tradition of patient/doctor house calls.
Patients today want options and healthcare providers are listening by examining new ways to use their real estate and adopting MOBs for practicing dozens of specialties.
CBRE Research will be monitoring the pulse of this emerging market.
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