CBRE Unites Medical Office, Senior Housing Practice Groups

As the U.S. health care system continues to evolve, investors and providers alike see opportunity in more integrated services across different property types. In response to this trend, commercial real estate services and investment firm CBRE Group Inc. (NYSE: CBG) has combined its medical office valuation and advisory services practice with its seniors housing and care arm, creating a single Healthcare Practice Group.

The combined group will cover a wide range of property types: independent living, assisted living, memory care, nursing care, continuing care retirement communities, medical office, surgical centers, out-patient rehab, and hospitals. It will be led by Zach Bowyer, Tom Baroch, and Bennett Johnson.

The growth of accountable care organizations (ACOs) and bundled payment programs are two driving forces behind this consolidation, Bowyer told Medical Office News. Both ACOs and bundled payments seek to incentivize different types of providers to collaborate on patient care, in order to potentially share in cost savings achieved for the Medicare program.

This is driving consolidation across the health care sector, with players increasingly interested in controlling the full continuum, from hospital through a post-acute episode. CBRE has been fielding many questions about this trend and is starting to see more activity in response to it, Bowyer said. The goal in bringing the CBRE senior housing and MOB experts together into a single group is to allow the firm to field questions more quickly and offer a more sophisticated perspective.

The group offers a variety of services, including appraisal, property condition, market studies, feasibilities, and underwriting due-diligence. And its clients include commercial banks, investors, property owners, real estate investment trusts (REITs), and others.

The integration trend is taking various shapes from a real estate perspective, and CBRE’s various client types are trying to determine how to best position themselves. One example is mixed-use developments that might involve not only co-located senior housing and medical office space, but retail and market-rate multifamily apartments, Bowyer said.

Skilled nursing and memory care tends to be seen as a more natural choice to co-locate with MOBs or other medical facilities, as opposed to lower-acuity settings such as independent living, he added. Meanwhile, real estate investment trusts (REITs) and private equity investors in senior housing continue to see MOB as a potentially good way to diversify their portfolios.

There is some caution right now given uncertainty around how President Donald Trump’s administration might change Affordable Care Act policies, but CBRE’s clients on the whole still believe that the drive toward more integrated care will continue, Bowyer said. In part, this is because it is being driven not only by policy and regulations, but by technology and other forces.

Changing the group structure does not mean that CBRE is changing how it calculates valuations for these different property types, Bowyer emphasized.

In 2016, these groups completed valuation or advisory assignments on more than 3,000 seniors housing and medical properties with an aggregate valuation of over $50 billion, according to CBRE.

Written by Tim Mullaney