The demand for medical services is expected to skyrocket over the next decade due to demographic trends. As baby boomers retire, the over 65 age bracket will continue to grow and that age cohort traditionally consumes three times the medical services of younger people. Advances in medical practice and technology and a focus on quality healthcare outcomes at the Federal, State and private insurer levels is driving a shift in site of care from inpatient to outpatient settings.
Physician practices have taken more measured, conservative approaches to their MOB space requirements in recent years due to the uncertainties in the reimbursement environment. Specifically, healthcare tenants are frequently remaining in place longer, minimizing relocations and facility expansions. Similarly, competition among hospitals and health systems to attract physicians and provide state-of-the-art healthcare is ever increasing while tenant improvements for existing space with impending renewal options is a major issue. As demand for outpatient office care continues to rise, along with insurance payments that incentivize low-cost settings of care, MOBs will continue to be an attractive option for physician groups and hospitals and health systems leasing medical office and clinic space.
GreenRock hPACE financing can help physician, hospital, and health system tenants and MOB owners to lower the cost of occupancy by providing tax assessment (hPACE) financing for a portion of the tenant improvements. Rent escalation on the portion of the tenant improvements repaid through special tax assessments will be avoided since these improvements will be excluded from the base rent. This financing structure will result in significant savings over the life of the lease.