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Feature Story: Third-party development continued to grow in 2021

Revista annual report showed a strong year overall; HTA was the largest developer

By John B. Mugford

As it’s done for the past five years, healthcare real estate (HRE) data firm Revista has compiled an outpatient development report from provides a ranking of the largest (by square footage) third-party HRE developers of the previous year.

The newly released “2022 Outpatient Real Estate Development Report,” which is based on 2021 data, reveals that the largest HRE developers can certainly celebrate a banner year last year.

“Overall, 2021 was a good year for third-party development firms, and outpatient development overall,” says Mike Hargrave, a principal and one of the founders of Revista, which provides a wide variety of HRE statistics and data for its subscribers. The Arnold, Md.-based firm has compiled the report since 2017 with some assistance from HREI.

Yet another theme emerged from Revista’s most recent report.

“This new data shows that (third-party) developers are grabbing an ever-increasing share of the outpatient projects being developed,” Mr. Hargrave points out, noting that it looks as if “hospitals and health systems are becoming more aware of the value of the high-quality work and, for the most part, the efficiencies that third-party firms can provide when developing projects for them.”

Revista’s statistics indicate that, of the 48.9 million square feet of outpatient projects started or completed in 2021, third-party firms led 43 percent of them.

Third-party led projects include both those that development firms own and manage, as well as projects they oversee on a fee basis for providers, including health systems and physician groups.

The remainder of the projects – those not developed by third-party firms – are considered self-developed and entail projects that are financed by an occupants of the space, which generally line up their own architects and general contractors.

For third-party developers, the results of Revista’s reports during the past four years might represent a welcome trend. in 2018, third-party developers accounted for 25 percent of the square footage of outpatient projects started or completed. In 2019, it was 32 percent. In 2020 it was 42 percent. And, as noted above, that percentage rose to 43 percent last year.

Who’s the biggest? Aside from overall HRE development data, the aspect of the report that seems to attract the most interest is the rankings of the previous year’s performance of third-party developers.

Coming out on top of two categories in 2021 was Scottsdale, Ariz.-based Healthcare Trust of America Inc. (NYSE: HTA).

HTA, a publicly traded real estate investment trust (REIT) that has been in existence for 15 years – and which started as a non-traded REIT in 2006 – has invested $7.5 billion, mostly in MOBs, in accumulating an HRE portfolio of 25.4 million square feet.

HTA entered the development arena in a big way starting in 2017, when it acquired most of the MOB portfolio owned by Duke Realty Corp. (NYSE: DRE) for about $2.25 billion as well as Duke’s medical development platform and team.

HTA led the way in 2021 in both the “projects started or completed” category with 13 overall projects for a total of 1.43 million square feet of space. That figure, according to Mr. Hargrave, is the highest total recorded by a single development firm since Revista compiled its first outpatient development report in 2018, which looked at 2017 data.

“HTA broke the record, by far, as we’ve never had a development firm top 1 million square feet in year in the overall ‘projects started or completed’ category,” he says.

The next two firms in the “projects started or completed” category were Milwaukee-based Hammes Company, with 12 projects and a total of 718,300 square feet, and Denver-based NexCore Group LLC with seven projects and 522,547 square feet.

HTA also earned bragging rights the 2021 “projects started” category, with seven projects and 999,753 square feet of space.

Hammes led the “projects completed” category in 2021, finishing nine projects with a total of 483,300 square feet.

Todd W. Kibler, principal of Hammes Partners, the investment arm of Hammes Company, credits the firm’s strong performance, in part, to the creativity of the team.

“We had a strong pipeline of projects going into the COVID-19 pandemic,” he tells HREI. “Many of these projects were deemed strategically important to healthcare providers and, as a result, continued to advance during the course of the pandemic. Our projects were not relegated to the sidelines and our team found creative ways to advance and deliver these projects for our healthcare clients.”

For a copy of the report, please visit RevistaMed.com. (Subscription required for full access.)

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