Medical Market Is Healthy

April 2, 2007
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GRAND RAPIDS — Even outside of downtown Grand Rapids' "Medical Mile," construction of new medical office space is heating up.

East Paris Avenue/Cascade Road, East
Beltline Avenue and especially along M-6 are areas that continue to see growth in medical office space. Olga Hallstedt of commercial real estate firm CB Richard Ellis/Grand Rapids estimated that while about 17 percent of KentCounty office space is vacant, the rate for medical office space is lower.

Hallstedt suggested keeping an eye on the M-6 corridor.

"I really see that as an emerging market, especially for medical, because doctors always want to be close to a hospital," Hallstedt said.

MetroHealthHospital is relocating from

Boston Street
to its new building just north of M-6 this fall. The hospital has partnered with The Granger Group to create MetroHealthVillage, which is slated to include medical office space as well as retail and a hotel. Spectrum Health and Saint Mary's Health Care have located outpatient centers near M-6, and other types of medical spaces are following.

"Can the area support this development? We can, as Grand Rapids continues to expand the medical resources and initiatives that we don't have currently," added Hallstedt.

John Mundell, senior vice president at CB Richard Ellis/Grand Rapids, pointed to the transformation of downtown's

Michigan Street
into a medical mecca. "I know from the state of Michigan standpoint, we stand alone with this level and type of development."

Mundell and Stan Wisinski, president of S.J. Wisinski & Co., agreed that the movement of some medical processes from hospitals to outpatient settings and the advent of specialists have spurred demand for medical offices.

Still, vacancies exist. The Harley Medical building on

Cascade Road
near the I-96 ramp — an 80,000-square-foot medical structure — was ready for occupancy last week but no tenants have been announced.

Medical office space can run as high as $20 per square foot, plus operating expenses, Wisinski said. The price is driven by the extensive build-out required, with doctors' offices usually demanding extra plumbing and walls to create exam rooms.

That's high enough that many Grand Rapids physicians decide they would rather own the building and pay rent to themselves, Hallstedt said.

"That's been a huge trend," she said. "They put the building in a separate LLC and can gain rent off that. It's really a matter of trying to defray costs. In years past, landlords only wanted to lease. In Detroit and Chicago, everybody leases. Here, they watch their pennies and buy."

"I think it goes through cycles," Wisinski added. "There was a cycle many, many years ago that doctors had to have at least part ownership. That died down, and now it's coming back strong, where doctors feel if they're going to pay rent, they should have ownership of it."

Parking also is a crucial issue for medical offices, Wisinski said.

"If parking is inconvenient for patients, they're going to look for more parking."

The older medical buildings dotting the city either face extensive remodeling to continue medical use or conversion to general office space, Wisinski said. "I'm finding medical practices shying away from older buildings. They want new and modern and buildings that have conveniences older buildings don't have."    

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