Hospital growth continues to rise in central Florida with the area seeing both on- and off-campus medical office building construction with nearly 100,000 square feet of new space in the pipeline. This is one of the key findings from Cushman & Wakefield's 2016 Central Florida Medical Office Report released last month.
"What's interesting about Florida in general compared to medical office space across the country is our growth in hospitals," said Anne Spencer, a Cushman & Wakefield director in the Orlando office. "The trend among hospitals across the country is downsizing. But in Florida, we're building hospitals and nearly every hospital is growing."
The report covers all space in the market dedicated to outpatient medical services, including owner-occupied and multi-tenant medical office buildings, community clinics, imaging centers, ambulatory surgery centers and specialized outpatient treatment facilities.
"The healthcare industry continues to play a more significant part in the overall economy," said Spencer. "It now directly employs nearly 15 million people and has caused the pool of available medical office space to tighten."
Some of the continued expansion and new development by hospital groups include:
- Orlando Health is building Spring Lake Health & Living Campus a senior housing component that will contain 180 beds and operated by Harbor Retirement Associates. The campus will also have a 60,000-square-foot medical office building by fall called the Orlando Health Medical Pavilion at Spring Lake.
- Orlando Health Central is expanding by adding a 5-story tower, 100 emergency beds and 40 private patient beds. Expected completion is this fall.
- Health Central is under construction of a medical office building called Summerport in Windermere at the intersection of County Road 535 and West Lake Butler Road. The 60,000-square-foot building will house physicians from Orlando Health. Expected completion is late summer.
- Florida Hospital planning to open an 18,000-square-foot freestanding ER in Lake Mary which will have 24 beds.
- The new Florida Hospital for Women opened in January. Located on the main Florida Hospital campus near Downtown Orlando, the 420,000-square-foot facility is 12-stories and contains 330 beds.
- Florida Hospital's Winter Garden facility is expected to open later this year. It has no overnight beds but the 97,000-square-foot facility will have an emergency department, acute care services, on-site imaging, pharmacy, and outpatient surgical services.
- Florida Hospital's Winter Park expansion started this past spring. The new construction will add new patient rooms to the emergency department, along with a new 177,000-square-foot 5-story patient tower that will house 97 beds.
HCA (Hospital Corporation of America)
- HCA has broken ground on a new hospital in Oviedo--a 64-bed acute care facility opening Jan 2017. There is also a 40,000-square-foot medical office building currently under construction that will should be ready in July.
- Central Florida Regional Hospital, based in Sanford, FL is building a freestanding ER in Deltona. The 10,500-square-foot, 12-bed facility is expected to be ready by the end of the year.
- Last November, Poinciana Hospital expanded by two floors at its existing facility. The additional floors added 46 patient beds and 40,000 square feet to the hospital.
"It's more difficult for a medical office building to be built unless they are funded by a hospital," said Spencer. "So what we are seeing is that hospitals are the ones building the medical office buildings right now."
Two reasons that medical office building construction is expected to rise is the state's population growth and an increasing aging population, according to Spencer.
"Nationwide, the trend overall is shrinking hospitals," she said. "But in Florida, not only are we seeing a growth in hospitals but we are also seeing a growth in urgent care centers and ambulatory centers. We call this the retail-ization of healthcare - making healthcare more convenient for patients."
Other key findings include:
- Central Florida's inventory of for sale institutional medical office buildings has been limited. The majority of recorded medical office building sales have been smaller, single-tenant buildings or medical condos acquired by owner-users.
- Year-over-year leasing activity increased a dramatic 104 percent through the fourth quarter of 2016.
- Direct vacancy of medical office space in the Orlando area has steadily decreased since 2011, falling 2.8 percentage points to the current level of 8.5 percent.
"The decrease in the vacancies is important from a rental perspective because there is not as much space available as last year," Spencer said. "It's not significantly reduced, but the trend is going down in vacancy and up in absorption. That's another reason we are seeing more construction."
Medical office building sales in Central Florida have been limited due to a lack of investment inventory being marketed. The majority of sales have occurred in smaller single tenant buildings or for medical condos acquired by owner-users.
"Investors really like Florida and we always get calls from investors who want to purchase medical office buildings," said Spencer. "But there are not many medical office buildings for sale. In other larger markets, you see many medical office building sales all of the time. Many of the current institutional owners like Florida. The rents are going up and they are keeping their buildings near capacity, enjoying the cash flow and not interested in selling."
For more information, visit www.cushwake.com.