Colliers Medical Office Report: Population Growth Fueling Medical Market Expansions

Key Takeaways

• The Columbia, MSA population is expected to grow by 5.4% between 2016 and 2021 to more than 866,000 people.
• Statewide consolidation of medical records will enable healthcare providers to service the community efficiently and at a reduced cost.
• Owners of hospitals are updating their interiors to improve patient experience and safety during their visits.
• Construction has begun at Lexington Medical Center’s 545,000 square-foot expansion.

Columbia’s Population is Growing

The population of the Columbia, South Carolina metropolitan statistical area (MSA) is growing significantly. The Columbia, MSA consists of Calhoun, Fairfield, Kershaw, Lexington, Richland and Saluda counties. In 2010, the United States Census Bureau reported the population of the Columbia, MSA to be 767,600 people. The population is now estimated to be 819,700 people.  The population is projected to increase by 5.6% to nearly 866,000 people by 2021.

Population growth is concentrated in Lexington County, which is nearly 760 square miles. The 2016 population of Lexington county is estimated to be 286,000 and projected to be 307,000 people by 2021, a 7.4% increase. Based on these projections from Esri, Lexington County will comprise 35.5% of the total Columbia, MSA population in 2021. The growth is occurring primarily in the 20-49 and 50+ age cohorts

According to Esri, people in the 50+ age cohort account for 32.8% of Columbia’s population and by 2021 will comprise 34.1%, an increase of 26,301 people over five years. People in this age group are more likely to require more routine healthcare services. To better serve the changing healthcare needs of the community, medical providers are focusing on two significant trends: statewide consolidation of patient medical records and enhancing the patient experience during healthcare visits.

Consolidation of Medical Records

The South Carolina Medical Association has recently announced plans to partner with KaMMCO Health Solutions to improve the efficiency of healthcare in South Carolina for patients and physicians. Other United States medical markets are pushing for similar electronic medical record software systems to improve patient care and safety and reduce costs as well. However, implementing the complex software can be difficult, as the records from hospital systems, outpatient and primary care facilities across the state will be folded into one system. The partnership between the South Carolina Medical Association and KaMMCO Health Solutions will create a single database for patient and physician information to allow healthcare providers to enhance the care given to patients statewide.

Enhanced Patient Experience

In order to create a better patient experience, hospitals are creating a welcoming atmosphere in the waiting areas and patient rooms. These improvements increase patient safety and better utilize space in patient rooms, creating a quiet, inviting experience that uses natural light, paint colors and comfortable and flexible furniture.

The Palmetto Health Baptist Parkridge Hospital, located in the Irmo area, exemplifies this trend. When guests enter the hospital, they are greeted by personnel who are able to check them in and escort them to the necessary department. Naming rooms similar to those used in the home, such as The Living Room for the waiting area or The Kitchen for the dining halls, elevates the at-home feel. Additionally, the interior design of the buildings uses nature, natural colors and comfortable furniture relieving some of the stress around visits to the hospital. The Palmetto Health Baptist Parkridge Hospital carries the theme to the exterior, where guests can sit on the front or back porches, use the labyrinth walking trail and meditation garden or listen to the man-made waterfall.

Other hospitals and outpatient and primary care facilities continue to improve the exterior of their buildings with fountains, new paint and windows. The waiting areas are being updated as well with natural light, comfortable and flexible furniture, televisions and art work. These new features allow for an enhanced patient experience without compromising patient safety or staff productivity.

Lexington Medical Center Expands

Lexington Medical Center has been servicing Columbia since 1971. The hospital has begun construction on a 545,000 square-foot expansion to their campus, which is expected to be complete in 2019. The project will add 71 inpatient beds to the hospital’s existing 428 beds, operating rooms, educational space, a dining area, Lexington Medical Center Pharmacy, Labor & Delivery and Mother & Baby departments and a 950 parking-space garage. In addition, the hospital opened a new 10,000 square foot rehabilitation center on the Lexington Medical Center Extended Care Campus in January 2016.

Market Conditions

Columbia’s medical office market is expanding but seeing little change from the end of 2015. Absorption was positive at the end of the quarter, leading to a vacancy rate of 8.0%. Average asking rental rates are steady in all submarkets, but Lexington and Northeast Columbia are experiencing slightly rising average asking rental rates. The Lexington submarket has increased to $19.45 per square foot per year (PSF/YR) at the end of the quarter from $19.19 PSF/YR one year ago. The average asking rental rate in the Northeast Columbia submarket was $23.81 PSF/YR at the end of the quarter, up from $23.47 PSF/YR at the end of the fourth quarter of 2015. Although average asking rental rates are unmoved in most submarkets and up in Lexington and Northeast Columbia, the market average asking rental rate was $22.51 PSF/YR, slightly lower than the average asking rental rate of $22.62 PSF/YR from the end of the fourth quarter of 2015.

New Consolidations and Partnerships

Consolidation of healthcare systems continued in the first half of 2016. Smaller hospitals with a declining patient base are merging or being acquired by larger healthcare systems. Larger hospitals and healthcare systems are strategically expanding to position themselves in areas with high concentrations of Columbia’s population and areas seeing large population growth, such as Lexington County.

Hospital systems are also consolidating several of their primary care facilities in one medical office building. Examples are the Palmetto Health and the Lexington Medical Center facilities on Dutch Fork Road in Richland County.

The Palmetto Health and Tuomey Healthcare System finalized their partnership, which became operational at the start of 2016.  The healthcare system is now Palmetto Health Tuomey. Additionally, Tennessee-based LifePoint Health completed its acquisition of Providence Hospitals. The acquisition will provide Providence Hospitals with new resources allowing the hospital system to expand its services throughout the community.

There has also been an expansion in medical university and hospital partnerships.  The University of South Carolina School of Medicine’s clinical departments have partnered with Palmetto Health’s physician practices to create the Palmetto Health-USC Medical Group.  The partnership creates the Midlands’ largest multi-specialty medical group.

Private physician practices are feeling additional pressure and consolidating with healthcare systems. As a result, some are vacating their offices and relocating to space owned or leased by the healthcare system.  Future consolidations are expected and thus a majority of new leases will likely be negotiated by hospital systems or located in healthcare system-owned buildings.

Medical Employment

Healthcare employment, those jobs in the Healthcare and Social Assistance sector, is strengthening due to the growing demand for healthcare services and treatment. According to July 2016 data from the Bureau of Labor Statistics, South Carolina has 203,800 healthcare employees. Since July of 2015, 6,500 jobs have been added to the healthcare employment sectors, a 3.3% increase. The increase in healthcare employment accounted for 14.3% of all jobs added in South Carolina over the same time.

 

 

Market Outlook

Columbia’s medical market will continue to evolve in the coming quarters, while medical office inventory will expand primarily at hospital controlled facilities. Additional construction of medical office space is expected to follow the Lexington Medical Center expansion. Expected population growth will strengthen the demand for medical services primarily in Lexington and Richland Counties.

For more statewide commercial real estate news check out our market reports at: www.colliers.com/southcarolina/insights

 

To download the complete report: Q2 2016 Columbia Medical Market Report.

 

 

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