Property Rounds: Commercial Changing times for medical office market
Even as the population ages and demand for medical attention rises, that segment of the commercial real estate market remains a mixed bag, according to local brokers.
Norman Urquhart, a broker with Coldwell Banker Commercial Scalzo Group in Bethel, said greater Danbury has more space available than clients. He said dentists looking for space have plenty of options, but finding the perfect fit can be difficult.
“Medical is a challenge right now,” he said. “I think there’s too much space out there right now.”
Urquhart sees a future demand for uses such as convalescent homes as the area’s population gets older and staying at home stops being an option.
Michael “Mick” Consalvo, vice president of Tower Realty in Brookfield, sees a strong medical market in some pockets and weak market in others. Newer construction and buildings in areas of high medical concentration are performing well, he said.
“We have pockets of decent space sitting empty,” he said. “Newer space is full, but older Class B properties are empty.”
That said, Consalvo said medical is the second-best performing market in the Danbury area, behind small industrial.
The Danbury area will have more space available in the coming years as Maplewood Healthcare has build-to-suit medical office space under construction on Stony Hill Road in Bethel. There are also plans to build a medical office complex at the cornfield property in Brookfield.
“We’re seeing some build-to-suit, but no one is building on spec,” Consalvo said.
Maplewood Healthcare is bullish on the medical market. The development arm of Maplewood Senior Living recently built the new home of OrthoConnecticut on Riverview Drive. The 43,000-square-foot building is thriving within the Berkshire Corporate Park in Danbury with OrthoConnecicut using the majority of space and smaller tenants complementing its services.
Maplewood Healthcare also recently developed a stretch of Route 6 in Newtown, near the Bethel border, in what has become known as the “Medical Mile.” Western Connecticut Health Network, or WCHN, which continues to expand throughout the region, is the major tenant of the new building at 170 Mt. Pleasant Road. WCHN owns hospitals in Danbury, New Milford and Norwalk.
Jay Lapham, portfolio manager for Maplewood Healthcare, told Hearst Media Connecticut in a March interview that his company would rather construct new buildings for medical purposes than repurpose old ones.
“When you build new, you can customize and help the image of the end user,” he said. “To build new gives a level of professionalism to the practice. The building is the first impression a patient has. To be in a new facility gives the impression of high quality and service.”
The Maplewood Healthcare buildings on Route 6 in Newtown are close to the Maplewood Senior Living facility on Mt. Pleasant Road.
Southwestern Connecticut’s newest medical office building is Wilton Wellness Center at 249 Danbury Road in Wilton, which is on the cusp of opening at the former headquarters property of HomeEquity.
WCHN has reserved the ground floor of the 50,000-square-foot center for its physician affiliate Western Connecticut Health Group. Wilton Wellness Center is getting interest from several other specialty clinics, according to Sean McDonnell, a principle in the Norwalk office of Avison Young, which is brokering leases at the building.
“State-of-the-art medical office buildings are in high demand and not easy to find,” McDonnell told Hearst Connecticut Media. “Efforts to identify land sites for ground-up development, or adaptive reuse sites for conversion, are ongoing. … There seems to be no shortage of demand anytime soon in specific areas.”
Just as WCHN is spreading out in the Danbury and Norwalk areas, Stamford Hospital is extending roots in its city. The Stamford Health Medical Group, part of Stamford Hospital, recently signed a lease for more than 20,000 square feet on Omega Drive in River Bend Center.
The medical mixed bag story extends into lower Fairfield County, said Robert Crane of the commercial real estate firm CBRE. He described the market for medical office space in Greenwich as tighter than in Stamford. The office complex at 75 Holly Hill Lane, in Greenwich, is the town’s only available large-block medical property, he said.
“In Stamford, there are a lot more options, and more affordable options, for medical office tenants,” Crane said. “Overall, Greenwich has a much higher demand for this type of space, but with a smaller inventory. When we look at Norwalk, their medical office product on the market is much older, meaning that high-end medical practices are less likely to head there.”
High tech, high demand
As health care offerings continue to evolve and incorporate more tech into practices, McDonnell said medical space is changing along with it.
“The needs and demands of medical space 10 years ago even are different than the needs and demands of today, both from the physicians’ perspective and the patients’ perspective, so what has to happen is you have to create new state-of-the-art space to accommodate the ever-changing requirements of the patients and the medical treatments,” he said.
Outdated buildings are no longer the standard with recent changes in technology and requirements within the medical field, particularly with areas such as record keeping and consultation offices. Digitizing records that once required massive rooms in offices has led to offices either downsizing or converting the space to generate more money.
“We’re even relocating tenants that we put into brand new spaces 10 years ago,” McDonald said. “In some cases a lot of the movement is groups going from a larger space to a smaller space more efficiently designed so that it actually provides cross benefits.”
Alexander Soule, Paul Schott and Jordan Grice contributed to this report.
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