With real estate playing an increasingly significant role in healthcare strategy, providers need cost-effective, high-quality facilities and speed-to-market. But they also recognize that their real estate partner must be more than simply a reliable facilitator of transactions. Providers need to know that their needs are studied, anticipated and proactively pursued on a 24/7 basis.
That sort of symbiotic, all-encompassing relationship has delivered a beneficial win-win for Colliers International (Colliers) and an award-winning nonprofit East Coast health system, which consists of multiple inpatient, outpatient and post-acute services and facilities.
Colliers’ long association with this client (the identity of which we cannot disclose due to its corporate policy) has been a fruitful and multifaceted collaboration. In part, the relationship has thrived thanks to the implementation of the Colliers360 program, a sophisticated real estate analytics technology platform. Via its user-friendly, efficient, flexible dashboard, this comprehensive lease administration tool conveniently provides the system with real-time visibility into a wide variety of customizable data and the ability to monitor building efficiency – a turnkey solution of complete coverage for its corporate real estate needs.
Colliers Executive Managing Director Bryn Cinque, who leads the account team working with the system, says: “By implementing the Coliers360 program, the client has visibility into the efficiencies of different offices, different locations, including all their off-campus locations, in real time. As one of the largest providers in its service area, what was once a labor-intensive undertaking for them has been completely streamlined, translating to a huge savings in time and money.”
More than technology
“But the Colliers360 technology is simply the most visible of the wide array of services the healthcare real estate firm offers its clients,” notes James Bailey, Colliers’ Senior Managing Director. Colliers has provided the system with comprehensive real estate support, including many transactions and services involving lease renewals, site identification and selection, strategic planning, market analysis and transaction negotiations. In particular, assisting the system identify strategically located sites – often through the repurposing of non-healthcare properties.
“This client is currently in a lot of medical office buildings (MOBs), but it is gradually moving into retail centers, preferably occupying the end cap,” Mr. Cinque says.
“It’s very logical because retail properties have the same high parking requirements that medical offices do, which is a minimum of five parking spaces per thousand square feet – and retail often exceeds that minimum. Healthcare is looking for highly visible locations as they’re trying to draw in patients. It’s become a much more competitive landscape as they’re trying to attract more patients and keep existing patients within their portfolio.
“In addition, retail affords them highly visible properties, which is important. Physically, the buildings lend themselves to medical as well. It’s just a vanilla box where you have separate mechanicals, so it’s easy from a construction perspective. It’s a very logical product type to convert,” Mr. Bailey says.
Among the largest transactions Colliers has facilitated for the system was a lease and repurposing of a large office building near a busy retail mall.
“The client initially identified a need for a medical health center pavilion in the area,” Mr. Cinque explains. “We at Colliers knew about the building, which had been vacant for some time. We quickly put two and two together, and the initial plan was for the system to occupy the first two floors of the building, but it was concerned about the need for future expansion if the new location proved successful.”
“The initial renovation included a family medicine/urgent care center with comprehensive imaging capabilities on the first floor, including X-ray and MRI, as well as central registration and pre-admission testing,” Mr. Bailey explains. “A DIRTT (DIRTT Environmental Solutions, a company named for the acronym, “doing it right this time”) interiors system was integrated into this floor’s renovation as well. The second floor contains a vascular lab, cardiac imaging, breast imaging, sports medicine and multiple physician office suites.”
However, knowing that the system would probably need to expand into the third floor at some point, Mr. Cinque, Mr. Bailey, and the Colliers team negotiated language into the lease that provided more favorable terms for its client if it became a full building occupant.
As expected, shortly thereafter, the system decided to lease the third floor with an outpatient surgery center containing four operating rooms, pre-and post-operating areas, sterile processing, additional support services and physician office suites.
When that happened, Collier’s foresight in pre-negotiating the lease paid off. The lease became a lower-cost, single-tenant net lease rather than a more costly and restrictive gross lease as part of a multi-tenant building.
“When it leased the third floor, the system’s rent was reduced and it gained control of the operation of the property,” Mr. Cinque remarks. “So now they have unlimited signage opportunities, they can use whatever security they want and essentially run the building however they want. And they’ve gone from a gross to a net transaction. This has created economic and management efficiencies for the location that would not have been possible.”
In addition to the cost-effective repurposing of traditional office space for healthcare, the facility is, as noted previously, located next to a busy retail mall, also making it a successful retailization story. The location, just south of a major highway, provides all the usual benefits of a retail site, including convenience, easy access, plentiful parking and high visibility – plus, in this case, branding opportunities in the form of prominent signage, thanks to Colliers’ foresight in structuring the lease.
Superior market knowledge benefits the client
Yet there is more to this story than technology and smart leasing strategies; this is also a story about people. Colliers and the system have a long, trusted relationship, and know each other so well that proactively bringing opportunities to the table is a routine occurrence.
Another example and cost-saving solution took the unlikely form of a vacant college campus.
The client needed a large academic-style facility to train its employees on its electronic medical records system on an ongoing basis. Again, as it had with the repurposing of the former office facility, Colliers’ intimate knowledge of the local market led to a creative solution: the repurposing of a vacant college campus. The campus was already set up as a college, complete with lecture rooms, computer labs, a large library, a cafeteria, a student reception center and offices. As a result, the system was able to move right in and begin training without significant tenant improvements or other changes, which saved substantial time and money.
“That was a great solution because the client successfully utilized it as training facility to onboard their staff to Epic,” Mr. Bailey notes. “In addition, they moved into the building literally as is, saving millions of dollars by avoiding a full buildout since they only need the location for two years.”
Although Mr. Cinque refers to the training facility lease as a “needle-in-a haystack” find, it was Colliers’ comprehensive market intelligence that put the firm in the position to find that time- and cost-saving “needle” for its client.
The Colliers difference
In the end, what is the Colliers difference and how does it benefit clients?
“I think it’s really a matter of Colliers being here long enough to know all the players, where the skeletons are, and who to contact,” Mr. Cinque says. “The familiarity with the players involved – the portfolio, the owners, the landlords – all makes the partnership function much more smoothly.”