Medical property sector growing and changing
There’s plenty of activity in the medical and health property market in New Zealand currently with specialist medical hubs being built, doctors’ practices being relocated within major shopping centres, and large scale health-centric developments changing ownership.
In a recent report, Australian consulting firm Urbis identified that the private sector has benefited from increases in wealth, an expansion of private medical insurance, concern about the adequacy of services and waiting times at public hospitals, and a growing awareness in the community of health-related issues.
Bayleys’ national director commercial real estate, John Church says with the general commercial property sector performing very well, medical-related property has the added advantage of being largely driven by factors outside of the traditional economic arena.
“The medical sector is insulated to some extent from any swings in the economy as the classic economic drivers like employment, business and consumer confidence, residential housing, and interest rates have minimal impact on how and when people access health services,” says Church.
An expanding and ageing population further future-proofs the medical sector as demand for health-related services burgeons.
“However, as with many other areas of the commercial and industrial property market at present, the availability of bare land or development opportunities in key centres may act as a handbrake on new growth in the medical sector.
“It is interesting to observe the way the listed sector is acquiring property in the medical arena, and how major medical brands are consolidating a presence around the country.
“The big players are getting bigger.”
Vitality in the Sector
NZSX-listed Vital Healthcare Property Trust (Vital) invests in high-quality health and medical-related properties in New Zealand and Australia and has close to $1 billion in assets.
It is New Zealand’s only listed healthcare real estate vehicle.
Vital’s New Zealand assets include Ascot Hospital and Clinics in Greenlane, Auckland, and Ascot Central, also in Greenlane; Kensington Hospital, Whangarei; the Napier Health Centre, and Apollo Health and Wellness Centre in Albany, Auckland.
At the end of 2015, Vital conditionally bought Lower Hutt’s Boulcott Hospital (opposite Hutt Hospital) for $30.7 million. The 38-bed private surgical hospital is leased for 22 years to ASX-listed Pulse Health Group.
Vital’s chief executive officer, David Carr says the company’s overall portfolio strategy is to have a mix across a range of asset classes including hospitals (surgical, mental health and rehabilitation), medical office buildings, aged care and strategic holdings.
He says Boulcott Hospital is a great addition to Vital’s Australasian portfolio and subject to the receipt of regulatory approvals, it expects to settle on the property in coming months.
The Green Cross at Welcome Bay.
“Quality healthcare assets and particularly private hospitals, rarely come to the market for sale,” says Carr.
“Sale and leaseback vendors normally prefer long term partners who will support their growth aspirations over time.
“Vital was a natural owner of Boulcott Hospital.
“We were attracted to its track record of performance and having Hutt Hospital — a major public tertiary hospital facility adjacent to Boulcott — also made it an appealing opportunity.
Carr says while the New Zealand healthcare real estate sector is naturally smaller than Australia’s, many of the drivers affecting that market are also evident here.
“We think there are still good healthcare real estate opportunities available in New Zealand, but they may just take a little longer to come to fruition.
“Being a long-term investor we’re prepared to be patient.”
Green Cross Health
NZX-listed Green Cross Health group is a leading provider of primary health care services in New Zealand communities.
The group has equity in 32 medical centres around the country and provides services to a total network of 47 practices, with around 20 under The Doctors brand. Green Cross Health also has 340 pharmacies under its umbrella with a mix of owned, partnership and licensees in its network, with equity in 88 of these.
Ownership of bricks and mortar medical facilities is not part of the group’s strategy. It is not a property trust.
Green Cross Health general manager, medical division, Shaun Smith says in the past its network of medical centres has grown organically and through acquisition.
“Our strategy is to focus on areas where Green Cross Health can best service local populations and growth areas, creating regional hubs with a preference for delivering more collaborative and easily accessible health care services in the community,” says Smith.
A more collaborative approach to healthcare making it easier for people to navigate through the healthcare system is part of Green Cross Health’s long-term vision.
“With immigration on the rise, shifts in demographics and many people moving to different areas of New Zealand each year,” he says, “being part of a trusted, recognised branded network becomes increasingly important.”
Doctors turned developers
Construction of one of Auckland’s newest medical developments — Mauranui Clinic in Epsom — is now complete, with just a handful of medical suites remaining unspoken for.
The developers and doctors behind the initiative are ear, nose and throat specialists Hamish Sillars and Bren Dorman.
The pair were previously owners within Gillies Hospital, a private surgical hospital in Epsom which is a joint venture between Southern Cross Hospitals and surgeons.
Sillars and Dorman embarked on the project to create a highly-spec’d medical clinic with multiple suites for professionals like themselves.
Offering more than 1000m2 over two levels with suites ranging from 60m2 to 100m2, the development is situated on a high profile site in the heart of Epsom.
Sillars says many medical and surgical specialists would like to own their own premises, but as standalone ventures, the maths doesn’t add up — and the market today dictates more than visiting a refurbished villa in a suburban street for specialist services..
“A recent study I read found that patients value ease of access, good parking facilities, nice consulting rooms, and proximity to other services highly when looking at health care options,” says Sillars.
“That emphasis on physical surroundings and convenience is clearly market-led and in developing Mauranui Clinic, we have considered what is important to our patients.”
Sillars says the Mauranui Clinic has deliberately kept its tenant profile very specific, opting not to include a pharmacy, or alternative practitioners.
Championing general practice
Better Health was established in 2009 with the objective of developing a more sustainable future for general practice in New Zealand.
One of its directors, David Jones, says Better Health generally gets involved with medical practices when GPs are looking to retire and would like an exit plan. It runs a number of integrated family health centres and has wide connections in the industry.
Better Health’s latest project is underway in eastern Christchurch where it is involved in developing an integrated family health centre within the Eastgate shopping centre called The Loft — a project that came about when Better Health acquired a Linwood general practice.
When it opens officially in early July, the integrated family health centre (IFHC) will be anchored by the Linwood Medical Centre, plus another two local general practices acquired by Better Health.
Allied Health Services are involved in the IFHC and include pharmacists, a dispensary, CDHB Older Persons Health, physiotherapy, hand therapy, acupuncture, midwifery, mental health counselling, and other services to be confirmed. The IFHS will also house the Nurse Maude district nursing co-ordination service. Jones says the new facilities within the Eastgate shopping centre are designed to be flexible, collegial, and accessible.