Despite three quarters of net positive absorption in the medical office market in Southern Nevada, zero off-campus medical office projects have been either planned or under construction since mid-2012. This trend is changing, however. According to data produced by health care data provider Revista, a total of 425 medical office building projects are now under construction in the U.S., with a total project value of $16 billion. In addition, 613 hospital projects are under construction nationwide, with a total project value of $64 billion.
Reflective of this growth, Southern Nevada is experiencing numerous hospital expansions and new construction. This surge is due in part to health systems responding to the demands induced by the Affordable Care Act (ACA), the growth of the newly insured, aging baby boomer population, and efforts to keep up with innovations in technology and the evolution of health care delivery. Health systems are expanding emergency room services and focusing on specific types of health care services in order to establish themselves as leaders in those specialties.
Who is Building What, Where
Dignity-Health St. Rose Dominican recently completed the multi-phased construction of its 220,000-square-foot expansion at the Siena Campus. The project’s first phase expanded the neonatal intensive care unit with 11 additional beds, followed by a brand new five-story tower with 96 additional private beds. The project also more than doubled the size of the existing emergency room with 56 emergency bays, six operating suites, endoscopy suites and expanded cardiovascular services. It also provided additional space for admitting patients, nutrition services, radiology, labs, retail and pharmacy, as well as outpatient support services. Dignity also added a new parking garage, and plans on upgrading the older building on the campus with infrastructure upgrades.
In addition, Valley Health System is expanding its reach to patients with its sixth hospital going vertical: the 245,000-square-foot Henderson Hospital at the $1.5-billion, 228-acre Union Village medical and senior-living complex in Henderson. Union Village is positioned to service not only Henderson, but also the eastern portion of Las Vegas and downtown Las Vegas. Approximately 553,000 people, including 143,000 senior citizens, live within 15 minutes of Union Village. Almost 1.6 million people live within 25 minutes of Union Village. Its position adjacent to U.S. 95, far from the crowded city center, offers convenient access, more so than the current central medical corridors accessed by the eastern portion of the Las Vegas Valley. More importantly, Las Vegas Valley as a whole, particularly Union Village’s trade area, is noticeably lacking in available large, contiguous medical space.
With the rise of consolidated medical groups realizing economy of scale, it is these spaces that are most sought after by medical practitioners willing to pay a premium for such a rare opportunity in this market. In the immediate vicinity of Union Village, there is only 87,552 square feet of medical office space. Of this, there is currently 19,999 square feet of vacant space in one building, representing a vacancy rate of 23 percent. The largest contiguous vacant space is 9,882 square feet. The hospital is slated to open in October 2016.
Sunrise Health System, which in 2013 completed a $60-million project to add two additional floors and increase the emergency room by 42 beds, announced on Aug. 31, 2015 that it will again expand its MountainView campus. The latest $90 million expansion plans include further expanding the emergency room to 64 beds, expanding women’s services, and upgrading the neonatal intensive care unit labor and delivery beds to 12, with an additional 32 beds for post-partum recovery. Because MountainView Hospital is a certified primary stroke center and an accredited chest pain center, it will add new diagnostic imaging and intervention technology to treat the most complex neurological and stroke conditions.
In addition to expanding its acute care services footprint, MountainView will construct an additional 80,000-square-foot, on-campus medical office later this year on the 8.2 acres adjacent to the hospital. This will provide office suites, a 225-seat auditorium for continuing education, community outreach programs and lectures with additional parking spaces. The existing medical office building is only 2-percent vacant, a testament to current demand, considering overall vacancy of Class A medical buildings in the Northwest submarket stands at 19.8 percent as of the second quarter in 2015. The overall vacancy rate across the Valley for Class A medical office is at 18.5 percent, according to the Colliers International | Las Vegas Third Quarter Medical Office Market Report.
Valley Health System broke ground on June 26, 2015, to expand maternity services at Spring Valley Hospital Medical Center. The project includes constructing a four-story tower to house up to 144 additional beds. The tower will provide three labor and delivery suites, 18 post-partum beds with the ability to expand to 18 more on the first floor, two neonatal intensive care beds, and direct access for maternity patients and their visitors. Part two of the expansion includes adding a 24-bed observation unit for patients waiting to be discharged or admitted to the facility.
Centennial Hills Hospital will begin building out the fourth floor of the hospital later this year, adding 36 inpatient beds and increasing its inpatient bed count to 226. The $9.7 million project includes transforming a previous shelled space into 20 private medical/surgical rooms and 16 intermediate medical care rooms
The Impact on Southern Nevada
The impact of these health systems expanding their footprints and levels of service includes fostering improved patient access and the delivery of health care to the local community. It also creates jobs by attracting new talent and encouraging the retention of health care professionals.