Medical Office Sector Rising In Importance, But It Needs More Work To Adapt To COVID-19 Era

Medical office properties were already one of the nation’s top real estate sectors before the coronavirus crisis, largely due to the aging of the population and consumer demand for new clinics and facilities close to home.

But the sector moved up another notch to fourth out of 24 commercial real estate sectors in the Urban Land Institute’s Emerging Trends in Real Estate 2021 report, Illinois Medical District CEO Dr. Suzet McKinney said last week during Bisnow’s Chicago Deep Dish: Healthcare Update webinar. And as some sectors sink due to the recession, the combination of even greater demand for healthcare services and historically low interest rates has investors further ramping up medical office purchases and funding new development.  

“Although industrial is in the best position to weather the current storm, thanks to the surge in e-commerce, COVID-19 has made the healthcare and medical office sector a bright spot,” she said.

The fear of future pandemics will create even more work for medical office developers in the near future, McKinney added. Retrofits will be needed to ensure patients and healthcare professionals can interact with less close, personal contact, including by adding telehealth capabilities.

“All of these facilities will have to be adapted to a post-COVID-19 environment,” she said. 

These changes are already happening.

There was a big shift in April, when millions of patients began consulting physicians through screens rather than in-person visits, according to HSA PrimeCare President John Wilson. But he cautions that while the new era in healthcare will be different, it won’t be a complete revolution.

“Is everything going to shift to telehealth?” he asked. “We certainly don’t see it that way.”

But healthcare experts say around 20% of future visits will be virtual, Wilson added. That will help relieve the expected boost in demand coming from the steady increase in the number of senior citizens, the demographic group that utilizes medical office properties the most.

W.E. O’Neil Construction Project Executive Stephanie Cotey said her firm has helped begin reconstructing the sector, and some end users, including labor unions, are starting their own clinics. W.E. O’Neil helped a plumbers union create its own health clinic, and Cotey said she knows of a carpenters union that built an advanced facility for its members, complete with a telehealth room that utilizes big-screen technology and greatly improves patient-doctor interaction.

“You still feel like you’re meeting person to person,” Cotey said.

That type of high-tech solution is exactly what is needed, according to McKinney. In the future, she would like to see more developments like Rush University Medical Center’s 800K SF hospital tower. The Chicago facility was built a few years ago, but it was designed in a way that will stop a future pandemic from disrupting operations. Its emergency room was split into three 20-bed units, each with separate air systems, which inhibits the spread of any infections.

“I think we all need to be forward-thinking in future building design to prepare for the health risks to patients and healthcare workers,” she said.