As a booming state in many aspects, it’s no surprise that Texas is also a leading state in new hospital construction and renovation. As reported by Reed Construction, Texas is building $1 billion or greater in hospital new construction and hospital renovation. Among the factors contributing to this increase are: a growing population, aging elder demographic and a movement to an urban setting.

3 Trends Impacting the Growth of Texas Medical Real Estate

1)    Population Growth:

Growing by over 20% from 2000-2010, Texas's population growth is more than twice that of the national rate of increase. This population growth also means more people will be added to the list of the uninsured. With 6.3 million Texans lacking health insurance, Texas is the state with highest number of uninsured citizens. Not only will more medical real estate space need to be developed, but specifically facilities that can provide quality care at a lower cost.

Uninsured patients typically seek treatment at hospitals’ emergency rooms. This is costly for hospitals and a growing trend has been outpatient and ambulatory surgery centers (ASCs) where similar, if not the same treatment can be performed. This is a good outlet for uninsured patients where overhead costs are not as high as hospitals’ emergency rooms and patients can be provided around the clock care. Along with California and Florida, Texas is the state with the largest population of ASCs according to a 2011 Cushman and Wakefield Medical Office Survey. However, uninsured patients are not the only drivers of these types of medical facilities.

2)    Demographic Shift:

Similar to the rest of the nation, Texas will be seeing a surge in the age group of 65 years old and over. In 2006 the US Census Bureau stated that more than 2.3 million Texans, aged 65 or older, composed 9.9% of the state’s population. That percentage is expected to grow to 11.7% of the state’s total by 2015.

The Baby Boomer group is one that frequently uses medical services and as a result will be a driver of outpatient facility growth. Outpatient facilities appear to be a cost effective direction of primary health services. Pragmatically, outpatient facilities are cost effective propositions for this profile and others offering more attractive rates of return as a model of delivery for healthcare providers and real estate investors.

3)    Urban Movement:

Texas is becoming less rural and more urban. In 2005, an estimated 86% of Texans resided in urban areas while 14% lived in rural areas.  With a migration to an urban setting health systems need to ensure their older facilities are retrofitted and able to accommodate a heavy flow of patients or they need to build new facilities to compensate.

Renovating means to modernize. Older facilities were not designed with today’s delivery of healthcare in mind. They continually require “updating” no matter how much “renovation” is done. New facilities offer original space configuration and construction models while appealing to recruits, current employees, and hospital patrons such as donors. Overall, renovation in many situations may be the only choice and though new construction is often considerably more expensive, renovation is a short term solution.

James Ellis, CEO, Health Care Realty Development Company, is a nationally recognized successful real estate investor and developer of medical office properties with a comprehensive knowledge of sophisticated real estate transactions, cost effective designs, and efficient property management.

Aaron Razavi is Associate Marketing Director at Health Care Realty Development.

Visit their blog at http://www.hcrealty.com/medicalrealestatedevelopment/