Medical groups are proving to be the right prescription for a down office market in Fairfield and Westchester counties.
“There”™s such a massive medical market out there right now,” said Sean McDonnell, executive vice president and head of the Rhys Medical Division, a newly formed division of the Stamford-based brokerage company.
“We”™re doing business in Manhattan, Westchester and Fairfield County and now in New Haven County. The mentality is the same, the reality is no one is advising doctors or protecting their interests and that”™s where the opportunity for success is; this is a growth field. In most cases they don”™t know their options or the flexibility they have.”
McDonnell, a real estate veteran, was recruited in 2004 by Norwalk Hospital as executive director of real estate operations and property management. He was hired as a defensive strategy against the encroachment of other hospitals as they opened satellite service offices.
McDonnell helped develop a model to push back with the hospital”™s own satellite offices, as well as develop the i.Park Health and Wellness Center on the Wilton side of Norwalk”™s Main Avenue.
“Danbury Hospital was encroaching from the north, St. Vincent”™s was encroaching from the east,” he said. “Look at the payer-mix between Westport, Wilton, New Canaan, Darien; the hospitals want that insurance. That”™s where they make all their money; it”™s all about market share. The hospitals are getting their physicians out to the community to refer them back to the hospital. After proximity to the home, patients listen to their doctors as to where to go for care.”
McDonnell said at i.Park, which is still a client via Norwalk Hospital, the private-practice doctors have now used all the available space in the building. He is helping Norwalk Hospital work on an unnamed two building medical center project on Reef Road in Fairfield. McDonnell was hired and began Rhys Medical Division two months ago.
“Hospital politics are bizarre and unique,” he said. “The dynamic between physicians, then health care professionals and then the business professionals side; they”™re all different breeds.”
In health care, the process far outweighs the outcome, he said.
“It”™s a far cry from the sales ABCs, always-be-closing. Everything is process driven in health care. No one person makes a decision; it”™s committees that make a decision. It involves far more than real estate.”
Chris O”™Callaghan, senior director of Cushman and Wakefield”™s Westchester and Fairfield markets, said the intellectual capital of the area also lends itself to the growth of the health care office market.
“We have a very educated population,” O”™Callaghan said. “The talent is here.”
O”™Callaghan said in a market where around 90 percent of high school students go to college, health care professionals are going to want to do business.
O”™Callaghan said WestMed Medical Group recently signed a lease for 80,000 square feet in the new Ridge Hill development in Yonkers.
“Medical has been a bit of a bright spot in what has been a fairly difficult market,” he said. “They”™re one of the groups that have seen some growth in Westchester.”
O”™Callaghan said Simone Development Properties has proposed a new medical office building off Westchester Avenue in Harrison.
“Now it hasn”™t been built yet, but it”™s a sign of demand,” O”™Callaghan said. “The market is preparing for what they sense to be more growth.”
In what would be the largest real estate purchase to date this year in Westchester, Sloan-Kettering Institute bought the former Verizon Communications Inc. facility at 500 Westchester Ave. in Harrison.
“They look for financial strength,” O”™Callaghan said. “The medical build-outs are more expensive than just an office build-out. You can”™t go to any landlord in this day and age and say I want a 100 (dollars) per foot building, not many can provide that. They need more plumbing, electric, and more rooms. A lot of these buildings are adaptive reuse, like Sloan”™s building. But if they are going to put a cancer center in there, that”™s a major capital infusion.”
He said 90 percent of the inquiries at Harrison Executive Park are medical inquiries, and all the new deals made have made by medical services.
Jeanne Marconi of the Center for Advanced Pediatrics at iPark was looking for a new location for her practice three years ago.
“One of the visions we had as a practice was that medical care for an entire family could be at the same location, said Marconi. “Taking into consideration the whole health care industry, we were thinking about how we stay in touch with our complement services.”
O”™Callaghan said the developing model in health care real estate is a similar market to retail in terms of formula.
“If you”™ve got a plaza, you need an anchor, you need a Nordstrom”™s,” McDonnell said. “Some physicians are reliant on others to survive, they need that foot traffic or the referral that an anchor creates. It”™s about where the patient volume is coming from. There are doctors that are sitting in offices with attorneys and accountants around them; none of those businesses are driving patients toward them.”
Marconi said she has seen that volume firsthand at iPark.
“We”™re open till 9 p.m. but we couldn”™t do that without the cross-pollination and volume that comes out of the other specialties,” Marconi said. “It has also allowed us to expand our complementary services and has forced us to know our neighbors.”
Marconi said being surrounded by other areas of specialty creates a competitive and encouraging environment.
“It allows you the chance to go to into each other”™s offices and fill in the blanks in medical knowledge,” said Marconi. The ear nose and throat doctor can tell me what new antibiotic are best or about a more cutting edge approach. We had that before but it wasn”™t in a progressive effort.”
Marconi said by putting the right mix of medical groups together fosters relationships.
“It”™s a major concern of healthcare reform about how the smaller practices are going to survive, this is how,” McDonnell said.
