Healthcare in New York City expands despite economy

Real Estate Weekly, June 27, 2001 by Bruce Fox

With a less-than-robust national economy, many projects in and around New York have been put on hold. Their owners and developers have chosen to wait until conditions similar to those of the mid-1990s return. One sector, however is moving ahead with new projects in the region: healthcare.

Helping to drive this expansion is the metropolitan region's status as home to some of the world's finest academic medical institutions and research laboratories. HRH Construction LLC has often worked with these institutions, as well as with many public and private hospitals throughout the city. HRH has been a leader in construction for these organizations, with healthcare traditionally representing approximately 35 percent of its work. Even with the current economy, the volume of HRH's pre-construction studies has tripled in 2001 alone. Clearly, the field is still expanding.

The growth of healthcare is being shaped by the fast pace of development in medical technology and research. Such advances spur the region's academic facilities to keep pace or risk losing not just their reputation within the medical community but also the funds to continue much of their work.

This expansion is also being driven by competition among hospitals and pressure to offer the most innovative services. Institutions must vie for patients among one another -- through marketing and outreach into new communities -- to find the revenue needed to survive. At the same time, HMOs are putting tremendous pressure on hospitals of all types to be more cost-effective. This goal clashes with hospitals' desire to maintain and improve services as well as to innovate. Facilities must become more efficient and be ready for greater use than their predecessors.

In addition, national trends are having an effect. With increased space per patient and more single-room facilities becoming the standard, New York hospitals are hard-pressed to find more room in their frequently "landlocked" surroundings.

Leaders of medical facilities face a choice: build new facilities around their original home campuses, upgrade outmoded existing structures, or develop new "off-campus" locations. Healthcare officials and entrepreneurs are finding solutions and new opportunities; some are choosing all three options.

To expand their original campuses with new facilities, hospitals are taking advantage of every possible space -- on the ground, in the sky, and in between. HRH recently completed a five-story addition on the roof of one hospital, for example, that gave the institution a substantial increase in operating rooms and other facilities that had to allow for the latest technology.

Academic medical centers are also taking another look at structures completed in the 1950s and 1960s. These buildings were modeled on very different standards. Floor-to-floor heights, for example, were often just under 12 feet; today, the standard is 15 to 16 feet to accommodate current technology and leave flexibility for developments yet to come.

In one recent renovation project, HRH constructed a day surgery unit by removing the deck for the floor above and rebuilding the unit's ceiling 1 foot higher -- which rendered the truncated upper floor useful perhaps only for mechanical space. This type of project can reduce a building's overall efficiency, but it also brings an underused structure back to life and gives it the redundancy needed for future expansions. Facilities gain significantly longer life cycles -- the goal is 100 years -- plus room to grow.

Another implication for real estate is the academic institutions' search for space to build new specialty facilities beyond their home campuses, which tend to be located away from central business districts. These new projects provide greater access for patients from the entire region, more suitable research areas, and greatly needed space on campus.

Construction of these new spaces is taking place throughout the city -- a few blocks from home, in prime Midtown locations, and at storefronts in communities (mostly outside of Manhattan) whose healthcare needs are often underserved. This outreach also provides new and important opportunities for branding of the institutions and even for fundraising (a thought that's never too far from the minds of developers and builders).

No matter the option, construction for healthcare is expensive -- costs in this sector are higher per square foot than any other. Owners, of course, want to keep costs down without jeopardizing the success of services provided. They are therefore eager to obtain construction estimates as soon as possible so they can make decisions on site selection, design, and other key elements.

To provide this efficiency to the institutions, HRH has established a separate Hospital and Research Division just for healthcare and related laboratories. Using proprietary technology, the department envisions the project from the first sketches and develops them into complete estimates of systems and architecture. HRH's system provides owners with early and frequent what-if reviews, and allows architects and engineers to work together far better.