Like retailers before them, Northeast Florida health providers are chasing growth corridors (Courtesy of the Jacksonville Business Journal) — The trend of healthcare providers chasing population growth by investing in outpatient facilities, urgent care and freestanding emergency departments isn’t a new one.
The strategy at play, according to one Florida expert, is an adoption of something that looks like retail expansion rather than traditional hospital development: follow the rooftops, identify service gaps and establish smaller locations before committing to major investments.
JLL Managing Director Lucia Hedke told the Business Journal it’s an expansion strategy reshaping development patterns across the First Coast, especially among the region’s fastest-growing communities. Hedke leads the Chicago-headquartered commercial real estate company’s healthcare operations for the entire state of Florida, servicing a nationwide portfolio of clients.
Especially for major, already-established systems, that follow the rooftops approach has made St. Johns County one of Northeast Florida’s most closely watched expansion markets.
“I have one or two calls a week with developers looking to come into [St. Johns] to buy land and develop or convert an office building,” Hedke said.
Organizations like Baptist Health and AdventHealth have invested millions in various freestanding facilities across the area. Across the past 24 months alone, the region’s five dominant health systems have poured at least $200 million into construction of such facilities, according to a Business Journal analysis.
Systems are also looking farther south toward Volusia County, where Hedke said land remains comparatively affordable for new developments. Freestanding facilities generally allow health systems to test demand before putting more capital toward building a hospital.
Northeast Florida has also seen a dramatic influx of healthcare-centered office developments in the past year as builders aim to get out in front of demand. But Hedke said that’s not always the end product market entries are searching for.
“None of [the groups] that I’m representing want to be in a medical office building,” she said. “They want to be in a higher class office building.”
Private equity-backed physician groups are also becoming a larger piece of the local healthcare landscape, creating new competition for providers and real estate alike. It’s not uncommon for independent physicians nearing retirement to choose to sell their practices to private equity-backed operators and remain with the practice for several years before eventually stepping away.
Those acquisitions can provide physician groups with capital to expand into new markets, add locations and invest in additional services without aligning directly with a hospital system.
This growth of private equity-backed healthcare groups is generating demand for additional clinical space throughout the region. Right now, Hedke said she’s working with at least five out-of-state clients to identify 10 to 15 different sites for concierge or private practices on the First Coast.
To Hedke, the region’s real estate market is one fueled by healthcare growth.
As the region attracts more residents and development pushes further into Northeast Florida’s suburban corridors, providers are each racing to establish footholds before their competitors do — real estate developers aren’t far behind.