Medical Real Estate

By Steve Barrett
Monday, July 1, 2019

Hospitals and Property Values: A Mixed Bag

Can a hospital enhance prices and rents for nearby homes? Maybe.

Factors such as the size of the hospital may influence those numbers, scientists at the University of California, Riverside found in a recent study.

Rents and home prices are higher in areas with bigger hospitals than in those with smaller facilities, they discovered. However, prices are lower in areas with small hospitals than in those that have no hospital. This may be owing to the fact that smaller hospitals tend to be in remote areas where real estate is already less expensive, according to the scientists.

Home prices increase and decrease more rapidly in areas around hospitals as well, according to the study, published in the Journal of Big Data.

The findings may improve home price prediction models, the researchers suggest.

When the Landlord Is a Patient

Negotiating your medical facility lease with a landlord who also happens to be a patient could get awkward — and costly — fast.

Colorado-based CARR Healthcare Realty recommends tenants in this situation ask themselves some questions, particularly if they feel they are paying too much:

  • Are you willing to risk hundreds of thousands of dollars in overpayment of rent on, for example, a 10-year lease simply to avoid the possibility of losing the landlord as a patient?
  • If you believe the landlord uses your services as cover for overcharging, are you sure you want him or her as a patient?
  • During negotiations, do you expect a landlord-patient to quietly reduce the rent by significant amounts out of a sense of fairness?
  • Do you understand that the landlord’s goal is to get as much money as possible for the space?

For a better relationship with a landlord-patient, tenants should hire professional representation to negotiate leases and thereby remove themselves from those direct conversations, CARR urges in a blog on its website.

Leveraging Real Estate to Fund Upgrades

Well-planned Hospital renovations can be many things: Architecturally inspiring and care-transforming come to mind.

What they usually are not is cheap. However, hospitals can leverage medical office building holdings to free up capital for renovations, notes an article in Healthcare Finance.

It cites the example of Clara Maass Medical Center in New Jersey, which needed major upgrades. To fund the work, Clara Maass, part of RWJBarnabas Health, handed control of three medical office buildings to Rendina Healthcare Real Estate.

That generated funds to replace a 1950s-era ICU and apply capital toward a 180,000-square-foot entrance. It also helped the hospital refocus on fundamentals.

“I think hospitals in general are looking to unload what is not in their core mission,” Thomas Biga, President of the Hospital Division at RWJBarnabas Health, tells Healthcare Finance. “Real estate is not our core mission.”