Adaptive reuse of office space for medical practices continues at strong pace

By Kevin Zimmerman

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For the past several years, real estate brokerages have been increasingly capitalizing on a trend in repurposing existing office buildings for medical use with a number of high-profile projects in progress throughout the county.

“Almost every town has an existing vacant building that can, if a number of needs can be met, be repurposed for medical use,” said Sean McDonnell, principal, Avison Young Healthcare Affinity Group in Fairfield.

“The office market has changed over the past two decades, as has the health care market,” said Guy Leibler, president of Simone Healthcare Development. “There’s less use for substantial office buildings — people are moving back to the city or urban centers. The properties become surplus, especially as health care changes from an in-patient to an ambulatory model. Given the improvements in everything from pharmaceuticals to technology, health care is now able to provide more and more services on an outpatient basis rather than requiring a hospital stay.”

Although the Bronx-based Simone has focused mostly in New York — last year it completed, with Fareri Associates, a major renovation and modernization of existing buildings and common areas at 3030 Westchester Ave. in Purchase to produce an 85,000-square-foot, four-story medical building for Westmed, the first new office construction along the Interstate 287 corridor in more than 25 years — it is increasingly seeing opportunities in Fairfield County as well.

One of those, again developed by Simone with Fareri for Westmed, involved the 36,000-square-foot building at 644 W. Putnam Ave. in Greenwich. Initially considered as a relocation site by BMW of Greenwich, which ultimately decided to remain at 355 W. Putnam, the site was redesigned for Westmed, which occupies 9,347 square feet on the second floor for medical offices and 3,356 square feet on the ground floor for a walk-in medical clinic. It’s Westmed’s first location outside of New York.

Other medical tenants at the site include Next Generation Care Pediatrics, Greenwich Hospital and CVS Pharmacy.

“We work with a lot of large health care networks on projects that we’re in progress on,” Leibler said, “and we’re currently looking at potential additional medical projects in Greenwich and Stamford.”

Multimedical use sites such as 644 W. Putnam are becoming the way to go, McDonnell said. “Certain practice groups benefit from being with, or at least near to, other practice groups,” he said. “Thanks to referrals and convenience for patients, they can do very well together.”

Such was the case at 233 Broad St. in Milford, an 8,000-square-foot former CVS that Avison Young converted into offices for Connecticut Dermatology Group, with Milford Physicians Services at 234 Broad and a lab nearby.

Often, adaptive reuses are the best use for vacated buildings, McDonnell said. “These are properties that have become obsolete and have no hopes of being resurrected. It’s not just a matter of putting up new glass or HVAC and a new sign out front.”

Still, that’s not to say it can work in every space or for every client.

“We go out looking for something that’s 50,000 to 60,000 square feet,” he said. “If something has a floor plate” — the amount of rentable area on one floor — “of 20,000 square feet, it’s immediately out of the picture. Otherwise you’re looking at multiple floors, which means duplicating security, check-in/check-out areas and making sure you have enough elevators. Nowadays people want it all on one floor, to create a multipurpose building that can offer a number of different services for different patients.”

Parking is also a key consideration. “Nobody wants to walk hundreds of feet just to get into a practice,” McDonnell said, “especially if you’re a mom pushing a stroller with another kid on your arm, or an elderly person who may have trouble walking.”

“Generally you need four spaces per 1,000 square feet, and really five is better,” Leibler said. “So if you have a 50,000-square-foot building, you need 200, or preferably 225 to 250, parking spaces. A lot of office buildings can’t offer that. You may be able to add a parking deck, but obviously that adds more time and expense.”

Finding suitable inventory can also be problematic in some towns. “A town will say they have 28,000 square feet of available medical space, but it’s in 16 different locations,” McDonnell said. “Sure, there’s plenty of vacancy on paper — but they’re all 1,800 to 2,000-square-foot buildings.”

The process of finalizing a project can also be arduous. “When a hospital’s vice president of operations or a top administrator in the C-suite approaches us, they don’t even know if it’s feasible,” he said. “You go through finding the right space, then you have to get buy-in from the physician groups: Are they going to be on site or are they privately affiliated? Will you send patients there?

“Then you go back to management, finance, HR to get their opinions,” he continued. “If you get that far, then you have to get approval from the board. We’ve gone through nine-month processes of signing and leasing, just to have the board shoot it down.”

In addition, reimbursements for hospitals are also constantly in flux. “They may make $8,000 on a procedure in January, but by November changes have taken place to the point where they’re making only $4,500,” McDonnell said. “Then it doesn’t work anymore.”

Once rejected, the building goes back on the market. “A medical center may have turned it down five years ago, then another hospital group bids on it,” he said. “It’s not necessarily a matter of ‘the first mouse gets the cheese.’ Sometimes it’s not even the second mouse, but the third mouse who gets the cheese.”

Avison Young is in the midst of a plethora of repurposing projects, among them the 40,000-square-foot building at 241 Danbury Road in Wilton, formerly the corporate headquarters of HomEquity and Bran Blau. Vacant for 15 years, Avison Young and New Canaan’s Cambridge Hanover are in the process of finalizing site plans and securing an anchor tenant for a medical complex. On Route 7 across from Town Hall, the building is expected to be delivered in June 2017, with tenants beginning occupancy in October.

Adaptive reuse for medical is something that’s “relatively new to us,” said Jonathan Garrity, president and CEO of Cambridge. “We’ve come to see it as a great opportunity. The medical industry is growing, as is the need for brand new, state-of-the-art facilities that include various practices and referrals within the same facility.”

In February, Cambridge Hanover acquired 23 Vitti St., a 0.56-acre parcel in New Canaan. “We ripped down two former service establishments that had some contamination issues, remediated the site and expect to start building medical offices in the fourth quarter,” Garrity said.

The town is in the final stages of developing a master plan for the Cross and Vitti Streets commercial district, aimed at improving the streetscape, increasing shared parking and possibly permitting more mixed-use commercial and residential building development in the district.

The latest facility to emerge from the trend is at 260-292 Long Ridge Road in Stamford, a 50,000-square-foot former General Electric office building that was converted by Building and Land Technology for medical use and rebranded as Long Ridge Health & Science.

On Sept. 12, a ribbon-cutting ceremony was held by Greenwich Hospital, Yale Medicine and Northeast Medical Group for the new outpatient facility. Greenwich Hospital will provide such services as physical and occupational therapy, comprehensive diagnostic imaging, rheumatology and neurology infusion. Yale Medicine’s Center for Musculoskeletal Care will offer a host of multidisciplinary services, including neurology and neurosurgery, physiatry, rheumatology, orthopedics, and sports medicine. Northeast Medical Group physicians will offer primary care services.

Meanwhile, Stamford Hospital leased the entire building at adjacent 292 Long Ridge Road and opened a state-of-the-art complex last September.

“Adaptive reuse is something that will continue, but for how long nobody can say,” McDonnell said. “There might be more widespread use of tele-medicine in five years — you come in, get some coffee, take your blood pressure, then talk to a doctor through a feed to discuss your issues, and your prescription might be filled from another country.

“Then,” he added, “everything changes. Again.”

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