What should health systems look for in a healthcare real estate development partner?

Health systems should select a partner with proven healthcare delivery expertise, transparent GMP pricing, capital flexibility, and a track record of on-time, on-budget delivery across regulated facilities like ASCs and imaging centers.

Why it matters

Real estate is often a health system’s second-largest expense after labor, and facility decisions directly affect access, margin, and growth. Industry benchmarks estimate new medical office building (MOB) projects at $250–$400 per square foot (shell) plus $120–$200 per square foot for clinical tenant improvements, while ambulatory surgery centers (ASCs) can range $400–$700 per square foot depending on OR count and acuity. With capital scarce and borrowing costs elevated, the wrong partner can lock in avoidable cost and delay for a decade or more.

Timelines are equally critical. From site control through opening, typical MOBs require 18–30 months and ASCs 20–30 months, including 6–9 months of design and 9–18 months of construction. Supply chain constraints have extended lead times for key components—ASHE has reported electrical switchgear often exceeding 40–70 weeks in 2023–2024—making early procurement strategy and realistic scheduling non-negotiable.

How it works

A high-performing development partner coordinates planning, capital, and delivery in a single, accountable structure. Early programming should align clinical throughput with right-sized space—e.g., a 20,000–40,000 SF multispecialty clinic, a 15,000–30,000 SF ASC with two to four ORs, or a 10,000–20,000 SF imaging and urgent care platform—while testing trade-offs across sites, parking ratios, and shell heights. They lead AHJ engagement—Authority Having Jurisdiction for permits, life safety, and inspections—sequencing zoning and entitlements (3–9 months) with schematic design to compress time to market.

On delivery, the partner establishes a GMP—Guaranteed Maximum Price, a contract cap on construction cost with defined allowances—typically at late Design Development or early Construction Documents. The right team brings a construction manager-at-risk or design-build contractor into preconstruction 12–16 weeks earlier than usual, validates quantities, and packages long-lead items first. MRI and CT equipment can require 26–52 weeks; air handlers 30–50 weeks; and generators 40–60 weeks, per industry and OEM advisories. In fast-growing markets like Middle Tennessee, proactive site due diligence (60–120 days) and early utility coordination can save months.

Key considerations

Capital structure should match strategy. Options include fee-simple ownership for balance sheet control; developer build-to-suit with a long-term lease; ground lease with system-owned improvements; or sale-leaseback to recycle capital. CBRE’s 2024 U.S. Medical Office insights indicate on-campus MOB cap rates commonly in the mid-6% to low-7% range and off-campus MOBs in the high-6% to high-7% range, affecting rent, valuation, and hold vs. monetization decisions. A capable partner can model rent at stabilized NOI with 2%–3% annual escalations and compare it to WACC and debt capacity.

Governance and risk allocation drive outcomes. Look for transparent open-book GMPs with shared savings, owner-controlled contingencies (3%–5%), and clear responsibility for code, infection control, and life-safety compliance. A healthcare-proven design team should integrate FGI Guidelines, NFPA 99/101, and local seismic, shielding, and sterile processing requirements. The partner should also navigate Certificate of Need where applicable—often adding 6–12 months—to prevent surprises. In growth corridors such as Williamson and Rutherford counties in Middle Tennessee, prioritize partners with local AHJ credibility and realistic parking, traffic, and utility plans that withstand public review.

Actionable takeaway

Before selecting a development partner, request a 12–page predevelopment memo that includes: a block-and-stack program, two site test fits, a conservative schedule with long-lead procurement milestones, an open-book GMP with alternates, and a side-by-side capital comparison (own vs. lease vs. sale-leaseback). If that package cannot be produced within 30–45 days using validated benchmarks, keep looking.

For an overview of how integrated planning, delivery, and capital work together, see the methodology outlined in our healthcare real estate services and the strategic lens described on our homepage. If you would like a tailored predevelopment memo for a clinic, ASC, or imaging project, you can request a planning session to assess cost, timeline, and capital options.

FAQs

What is the typical timeline for a new outpatient facility?

For a 40,000–80,000 SF MOB, expect 3–9 months for entitlements, 6–9 months for design, and 9–15 months for construction, with build duration varying by winter conditions, sitework complexity, and long-lead equipment. ASCs commonly require 12–18 months of construction due to sterile processing, med gas, and life-safety systems.

How do Guaranteed Maximum Price contracts reduce risk?

A GMP sets a cap on construction cost with a detailed scope, unit prices, and allowances, shifting overrun risk to the contractor except for owner-directed changes. When paired with open-book cost reporting and shared savings, it creates pricing transparency and incentives to beat the budget.

What rent should we expect on a developer-owned MOB?

Market medical office rents for new Class A space frequently underwrite in the mid-$30s to mid-$40s per square foot, triple net, depending on sitework costs, yield, and cap rates. On-campus assets and high barrier-to-entry submarkets may push higher to meet return thresholds and structured escalations.

How large should an ASC be for three operating rooms?

Three-OR ASCs typically range from 18,000 to 28,000 SF depending on pre-op and PACU ratios, sterile processing footprint, and imaging support. Early programming that models case mix and turn times will right-size the perioperative flow and avoid overbuilding.

What is an AHJ and why does it matter?

AHJ stands for Authority Having Jurisdiction, the agency or agencies that interpret and enforce building, fire, and health codes for your project. Early and consistent AHJ engagement helps confirm life-safety interpretations, expedite permits, and prevent late-stage redesigns that add months and six-figure costs.

Bremner Healthcare Real Estate partners with health systems to align real estate strategy with clinical performance and capital efficiency.