Medical office buildings lead health care construction growth

Led by an ongoing drive in new medical office building (MOB) construction, health care facilities overall are geared for continued growth in 2016 after the field’s strong 2015 for the industry, according to Revista, Annapolis, Md., a leading source of data on health care property and construction.

A report released by Revista shows that the health care real estate construction pipeline is active and growing with $97.1 billion in projects either under construction or in late planning stages by the end of 2015. This represents an increase of 12 percent from the $86.7 billion under construction or in planning by midyear 2015.

Revista’s 2015 Year End Medical Real Estate Construction Report for the U.S. covers hospital and MOB construction projects that are new, expansions or replacements, greater than 7,500 square feet and $5 million in value.

MOBs continue to lead the way for new health care construction, with completions expected to reach 23.9 million square feet, says Elisa Freeman, principal, Revista. That’s a substantial increase from the 12.9 million square feet completed in 2015, and reflects a continual move to community-based care by health systems.

“There is still a movement toward the community and away from the hospital campus in MOB construction, with 72 percent of projects in the pipeline being off campus,” says Hilda Martin, principal, Revista. The average size of a new MOB is 50,000 square feet compared with the 30,362 square feet of the existing stock of MOBs, she notes.

Overall, health care is projected to complete construction on 43.7 million square feet of space in 2016, including hospitals, MOBs and urgent care centers, which is comparable to 2015’s figure of 43.6 million square feet, according to Revista.

But hospitals are going to experience a reduced share of overall volume of space in 2016, with 19.9 million square feet of new construction this year, down from 30.7 million square feet in 2015, Revista reports. The drop is another indicator of health care’s changing focus on the community.

Even with the drop in total new hospital space, spending on new hospital construction is expected to increase in the first half of this year compared with that of the same period in 2015 and 2014 as new projects start to ramp up.

“Overall, Revista is expecting $16.1 billion of hospital construction projects to start during the first half of 2016,” Freeman says. “This is up 44 percent from the first two quarters of 2015 and up 101 percent from the $8 billion started in 2014.”  

The vast majority of hospital projects are expansions, according to Revista. Of the 691 hospital projects under construction across the nation, 519, or 75 percent, are expansion projects. The remaining 25 percent are new hospitals and replacement hospitals, the firm reports.

Health care construction is occurring in every state, with more than 137 million square feet of construction being built in more than 1,200 new projects either underway or in the late planning stages, Freeman says.  

The top states for health care construction are:

• California: 13.6 million square feet
• Texas: 12.8 million square feet
• Florida: 8.8 million square feet
• Pennsylvania: 7.9 million square feet
• New York: 8.1 million square feet