We assembled a panel of industry experts to tackle this month’s question.
Here’s what they had to say:
Cory Atkins, principal, Atkins Cos. (West Orange)
As patients’ needs and expectations evolve, commercial real estate and health care are intersecting as providers increasingly aim to create a convenient and welcoming experience. Subsequently, health care providers are changing their models in a clear shift to provide a wide range of outpatient and off-campus treatment options. This shift has caused health care providers to prioritize spaces that have an ideal blend of location, accessibility and visibility within a given market as well as room for potential expansion to align with their growth goals. Considering health care systems will grow in both size and reach in the years ahead, substantial capital will continue to be invested into spaces that fit their needs in what has become one of the most stable and lucrative commercial real estate property types.
Steve Barry, executive vice president, facilities management and real estate development, RWJBarnabas Health
Although telemedicine rose in popularity during the pandemic, the desire and need for in-person medical visits have rebounded tremendously and show no signs of waning.
In the coming years, the communities we serve in New Jersey — and particularly our aging population — will continue to seek greater accessibility to high-quality health care close to home. Ambulatory care facilities such as clinics, medical offices and urgent care centers can offer faster, easier access to treatment and reduced costs for patients.
Amid this significant shift in the way care is delivered, health care providers across the U.S. are working to develop plans to optimize their ambulatory footprints. There is tremendous opportunity for providers to strengthen their reach in communities by meeting patients where they are.
At RWJBarnabas Health, we’re focused on expanding our ambulatory options to increase access to care as we continue to grow as an anchor institution in the state.
Chris Cirrotti, associate principal, Langan (Parsippany)
From hospital expansions to adaptive reuse medical office buildings, health care and commercial real estate continue to be intertwined. We are seeing a continued demand for community-based care, and our clients are redeveloping post-pandemic, underutilized office and retail spaces, which come with a variety of unique challenges — from large footprints to limited parking supply. For example, our team is providing comprehensive civil and environmental services for the redevelopment of a portion of the Monmouth Mall with medical outpatient facilities.
We continue to see a robust pace of hospital expansion projects, including Hackensack University Medical Center’s Helena Theurer Pavilion, a state-of-the-art, nine-story surgical and intensive care tower, and Rutgers Cancer Institute of New Jersey, the state’s only National Cancer Institute-designated comprehensive cancer center. As demand and competition for top-notch medical care grows, we anticipate hospital expansion and construction to continue through 2023 and beyond.
Randy Horning, vice president, NAI James E. Hanson (Teterboro)
As 2022 wound down, 60 percent of health care and life sciences investors intended to engage in M&A activity in 2023 despite the turbulent economic conditions. As a result we expect M&A volume to increase throughout 2023, albeit more cautiously due to global economic instability.
Current high interest rates and valuation misalignment between buyers and sellers may slow deals in Q2, but volume will increase in the second half of 2023.
Specialty practices will stand out in 2023 with cardiology, GI, oncology, orthopedics/PT and other specialty physician practices remaining popular. Specialty practices also generate opportunities to aggregate significant volumes of clinical data, which biotechnology and pharmaceutical companies are monetizing as they develop new treatments.
With digital health providers expanding their scope of care to include behavioral health, this currently fragmented market — comprised of informal private practices — is ripe for consolidation, which will necessitate significant real estate expansion.
Shawn Straka, executive director, Cushman & Wakefield (Morristown)
Pharmaceutical and biotech companies continue to grow in New Jersey due to its strategic location, talented workforce and supply chain infrastructure. The biggest challenge is the lack of existing inventory, which, together with strong demand from biotech and pharma, keeps lease rates elevated and overall vacancy around 8 percent.
Several lab developments are underway. Notably, the HELIX in New Brunswick will create a new 12-story building for the New Jersey Innovation HUB and laboratories for Rutgers University. Several new ‘GMP Shell’ projects are in discussion. However, speculative development of these facilities are costly and will face headwinds in the current economic environment.
Office conversions to R&D lab require buildings with adequate power, loading and clear height before significant MEP upgrades. The cost of these additional improvements makes it difficult for developers to build on spec.
New Jersey’s life sciences market will continue to be strong based on its attributes and pharmaceutical legacy.
