To Own Space or Lease It, That's the New Healthcare Real Estate Question

Commentary by, Chris Gordon, Senior Managing Director, Global Healthcare Services

This article outlines the decision criteria that a health system or physician group should consider when evaluating whether to own or lease their real estate and how to engage the appropriate parties to execute different project types.

As suggested, it is often of great value for a healthcare provider to have a competitive bidding process with developers with the help of an advisory firm or broker. While the exact scope of the development and the individual line items of cost are important, the yield returns demanded by the developers and the development and management fees they charge for their perceived “risk” are oftentimes the most impactful to the overall cost or lease rate that a healthcare provider will pay for the building. Making sure that these yields and fees are both within market and the lowest offer compared to other developers brings the greatest financial value to the healthcare provider. A smart advisor that executes on the mission of the project can help deliver the best “cost of capital” for the project when the healthcare provider is choosing to employ the use of another party’s capital.

Written by Dave Arnold, Irgens Partners, September 13, 2017

A rapidly changing healthcare market is impacting how health systems deliver care to patient populations, as well as development strategies for new buildings and facilities.

The impact of long-term capital allocation for on- and off-campus facilities is prompting leadership of many health systems to carefully consider either owning real estate outright or leasing space from a third-party developer on a build-to-suit basis.

Each approach has advantages and disadvantages that will impact long-term strategies for efficient delivery of care and the growth of an organization. The following is an overview of some considerations to be aware of with each approach.

Read the full article here


All information contained in this publication is derived from sources that are deemed to be reliable. However, Newmark has not verified any such information, and the same constitutes the statements and representations only of the source thereof, and not of Newmark. Any recipient of this publication should independently verify such information and all other information that may be material to any decision that recipient may make in response to this publication, and should consult with professionals of the recipient's choice with regard to all aspects of that decision, including its legal, financial, and tax aspects and implications. Any recipient of this publication may not, without the prior written approval of Newmark, distribute, disseminate, publish, transmit, copy, broadcast, upload, download, or in any other way reproduce this publication or any of the information it contains. This document is intended for informational purposes only and none of the content is intended to advise or otherwise recommend a specific strategy. It is not to be relied upon in any way to predict market movement, investment in securities, transactions, investment strategies or any other matter.

Download Our

Sign Up for Our Newsletter