With a burgeoning population, no certificate of need requirement and an expanse of space in which to build – you might be led to believe that a Texas metro like Houston would be one of the leaders in terms of hospital construction. And indeed, you would be right. Houston is the number one metro in terms of square feet of hospital space under construction. As of the end of 2017, Houston had roughly 4.2M square feet of hospital space under way – about a million square feet ahead of the runner up, New York. Houston Methodist is expanding their ER at their San Jacinto location and then adding bed towers and expanding services in 3 of their other hospital locations. UTMB has several projects underway at both their Galveston and League City locations. Memorial Hermann is in the process of a major renovation and expansion of their Texas Medical Center location to include 160 new beds, new operating rooms and new emergency room bays. Memorial Hermann at Texas Medical Center commands the highest share of inpatient revenue of any hospital in the metro area making up a full 10.8% of the total and that project alone is 1.3 million square feet – scheduled to be completed in early 2019. All this growth is working to keep up with demand as Houston, already the 5th largest metro in the country, gained almost another 100,000 residents just in the last year. This was the second largest gain of any metro in 2017, behind Dallas. Population growth aside, earlier this week plans were announced for a major expansion at Texas Medical Center with the addition of a 30 acre biomed campus scheduled to break ground next year. This project is estimated to create 30,000 jobs and establish Houston as a global hub for biomedical research, which local systems and providers can expect to drive even more patient demand – both locally and from outside the Houston metro.
Houston is also quite active on the outpatient side. Total sales transaction volume of MOBs in 2016 & 2017 ranked them at number 4 with $1.25B having traded. In terms of square feet almost 12% of inventory changed hands in those two years. Healthcare Trust of America is at the top of the list having acquired about a dozen properties in that time period as part of several different transactions. According to Scott Peters, CEO & President of HTA, “Houston is one of the top cities for healthcare in this country, with people coming from around the world to receive care at its leading healthcare institutions, including in the Texas Medical Center. It has a diverse and dynamic knowledge-based economy which is driving growth, making it an attractive place for us to invest in outpatient real estate. It is now our second largest market, with almost 1.5 million square feet, and we look forward to using this scale to grow with these strong healthcare providers.”
Medical Properties Trust also recently made a significant investment with Steward Healthcare which involved a few large outpatient buildings in addition to their hospitals. As far as outpatient construction, Houston is following the national trend with a leveling off of new inventory. After a big year of MOB deliveries in 2016, completions backed off in 2017 and even less are scheduled to open this year.
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