Colorado-Real-Estate-Journal_367708

HEALTH CARE, SENIOR & LIFE SCIENCES O n the verge of recession. Inflation and interest rates continue to rise. Real estate fundamentals are upside- down. Banks pulling back on commercial real estate lending. The headlines can paint a pretty dire picture for much of the com- mercial real estate landscape in the U.S., with the office market as the focus of the highest drama. Still dealing with the aftermath of the pandemic and with supply exceed- ing current (and foreseeable future) demand, office buildings, once at or near the top of the CRE food chain, are now among the most tenuous of asset classes. In many cases, market conditions have left owners with no viable options for refinanc- ing office assets that have notes coming due. It is debatable when the office market will eventually recover (varies by location), but the short-term envi- ronment has many landlords looking for creative solu- tions to repurpose their properties for other uses. n The conversion challenge. We are seeing examples of office buildings being converted to multifamily, edu- cation, behavioral health, life/bio sciences, and medical office uses, among others. Here is a reminder of some of the inherent challenges of converting office buildings to health care uses: Most office properties are not equipped for the basic needs required for health care use. Cov- ered drop-off areas, proximate and abundant (five per thousand square feet) parking, ADA access, gurney- sized elevator cabs, areas for medi- cal gasses and backup generator are all examples of requirements that often prove to be impossible, impractical or cost-prohibitive for an office building to transition to concentrated and dedicated medi- cal use. n What’s in a name. It is not sur- prising that some major institution- al health care real estate owners are moving away from any reference to “office” and choosing to refer to their assets as “outpatient medical” buildings instead of medical office buildings. This not-so-subtle shift in label is part of a deliberate strat- egy to differentiate and distinguish typically stable and highly desirable health care real estate assets from the more challenged traditional office silo. It may be mere seman- tics, but it underlines the current sentiment. Will OMB catch on and replace the long-established and widely used MOB in real estate ver- nacular? To be determined. n The capital markets. Not that the outpatient medical market is Please see Burke, Page 17 INSIDE Developers turn to top-notch amenities to make residents feel at home Attracting older adults to repositioned office buildings may be a new trend Senior housing Converting office PAGE 10 PAGE 12 The percentage of care provided in the outpatient arena is increasing Outpatient care PAGE 6 October 2023 Daniel Burke Senior vice president, CBRE Taking the ‘office’ out of medical office