Medical office buildings remain in high demand

Courtesy
Northern Nevada Sierra Medical Center opened earlier this year.

The COVID-19 pandemic hammered some sectors of commercial real estate – retail, hospitality – but one sector proved to be quite “recession-proof.”

Medical office buildings remain in high demand, especially with the ongoing population growth in greater Reno-Sparks. Dickson Commercial Group in June added five people to its staff to form a new healthcare services division that will oversee leasing and property management for nearly 400,000-square-feet of medical office space in greater Reno-Sparks.

The team includes:
• Jamie Krahne, senior vice president
• Nikki Tanner, senior property manager
• Mark Rumble and Fred Bonnenfant, building engineers.
• Elisa Weeks, office manager and property management assistant
• Cody Chorjel, property accountant

DCG’s healthcare services division also includes a Las Vegas component consisting of Krahne, Mike Tymczyn, vice president of leasing, and Lily Ponce, leasing assistant. The Southern Nevada team will manage just under 700,000 square feet of medical office space spread amongst six hospital campuses.
Dominic Brunetti, principal and managing broker of Dickson Commercial Group, told NNBW the new team was formed specifically to service the region’s growing medical office sector.

“It is a great team,” he said. “They are specialists in on-campus and off-campus medical office leasing and property management. Jamie has really carved out a deep yet specific niche in the market in representing medical practices and specialty practice tenants, as well as medical property owners.

“It (medical office) is critically important to the commercial real estate environment in the state of Nevada and nationwide,” Brunetti added. “Healthcare properties are one sub-sector of commercial properties that are growing, and that growth wasn’t impeded by the pandemic. It also has been accelerated by the diversification of our population and improvements in technology for healing and wellness.”


Krahne formerly worked for Ensemble Real Estate Solutions and has a long history of leasing, property and construction management and tenant representation in the medical office sector. She said that shifts in the way healthcare is delivered in Reno-Sparks and other communities has practitioners seeking more off-campus medical office space.

“This sector of healthcare real estate is very nuanced,” Krahne said. “The way healthcare has been delivered in our community for a long time is that you have large medical office buildings on campus, and those groups primarily have a relationship with that hospital system.

“Now, physicians are trying to get more into their communities and get closer to their patients. That’s why you are seeing healthcare facilities pop up in retail centers or office buildings being converted to medical offices — they are creating more convenient ways for patients to access care than going to a hospital or a hospital campus.”

Krahne said on-campus medical office vacancy is hovering around 7 percent, but off-campus vacancy is much lower as more practitioners seek space closer to where their patients live. Vacancy in that sub-sector could tick up, however, as some dark big box spaces in the region are converted to medical facilities — think the old Scolari’s market on Sharlands Avenue.

The healthcare services division is a first among Nevada commercial brokerage houses, Krahne added. While nearly all have a team of office property specialists, none have a team dedicated solely to leasing and managing healthcare facilities.

The DCG healthcare services division’s property management portfolio consists of three hospital campuses — Northern Nevada Medical Center, St. Mary's Center for Health, and Northern Nevada Sierra Medical Center, as well as the Copperfield Medical Building in south Reno. That 36,630-square-foot, two-story facility on the corner of Double Diamond and South Meadows parkways houses Great Basin Orthopedics, Great Basin Physical Therapy and Spine Nevada. It was purchased in February by JLL Income Property Trust for $14.6 million.

Krahne’s team also will be leasing the new medical office building currently under construction at Sierra Medical Campus. The steel framework for the 88,000-square-foot facility has been erected, and construction is on track to wrap up the shell of the building by January with medical services delivered by March of 2023.
Krahne said pre-leasing activity has been brisk due to its proximity to the new hospital and a marketwide lack of new medical office space.

In other regional office market news, there was just under 17,000-square-feet of net absorption in the second quarter, the fourth consecutive quarter the market saw positive net absorption, Colliers noted in its second-quarter office market report. Year-to date total net absorption for the office market stands at 41,747 square feet.

There was $31.1 million in sales activity, and vacancy stood at just under 11 percent as tenants continue to re-evaluate their office space needs, Colliers reported. Vacancy in South Meadows increased as Employer listed its nearly 80,000-square-foot building and PODS listed its 22,000-square-foot facility for sublease, Colliers noted.