Over 3.6 Million Newly Eligible Insured Patients In Southern California Will Drive Demand For Healthcare Real Estate

Online, March 16, 2011 (Newswire.com) - Healthcare providers in Southern California will be challenged to meet the demand for additional space as over 3.6 million formerly uninsured area residents become eligible for health insurance coverage options under the recently enacted healthcare reform law. This surge of newly insured patients will drive real estate demand for hospitals and medical office buildings. Likewise, freestanding outpatient facilities will need added capacity as well as ancillary office-based services, such as medical billing and back-office providers.

According to the UCLA Center for Health Policy Research's 2009 California Health Interview Survey, over 3.6 million Southern Californians will become eligible for new insurance coverage options under the Patient Protection and Affordable Care Act, which was signed into law in March 2010. This translates to approximately 7.2 million square feet of new medical space required to handle the healthcare needs of the newly insured.

"These newly insured patients will need a place to receive medical attention, and currently, the space does not exist," said Bryan Lewitt, Senior Vice President of CB Richard Ellis's Southern California healthcare services practice. "With less than 1 million square feet of new medical office space expected to come online for Southern California in 2011, the gap between what's available and what's needed is evident."

According to Lewitt, the current economic downturn may create high-yield real estate investment opportunities for many providers and real estate investors. "In this recovery, no industry is better positioned than healthcare to take advantage of the reduced pricing and lower lease rates available in the current market," he said.

High vacancy in both office and retail properties make them ideal candidates for conversion to medical use. "In fact, property owners today are recognizing that the highest and best utility for many properties is a medical use," said Lewitt. "Likewise, there's also an immediate opportunity for hospitals and medical groups to monetize their real estate investments. There's strong investor demand in Southern California for sale-leaseback projects, as well as the ability for healthcare tenants to receive ownership through leases with equity or as investor tenants in real estate syndications."

Lewitt added, "It's important to act when windows of opportunity present themselves, and the healthcare and real estate industries have a real and rare opportunity to help each other. With CBRE's support, effectively utilizing and converting vacant space is exactly what is needed to help ease the pent-up demand for medical space."