The do’s and don’ts of selecting a healthcare development site

When a healthcare organization begins planning for a new facility, one of the first and biggest questions to consider is, “Where?”

More than just picking a piece of property, choosing the right development site can affect the cost, timeline and ultimate success of a project.

To help healthcare organizations contemplating development plans in 2018, consider these do’s and don’ts of selecting a development site.

Do: Determine priorities
Identifying the right site starts with setting a clear vision for the project. That is – understanding how the facility will function, who the target patient population is and what you expect the facility’s place will be in the broader market. From that foundation, you can develop a list of priorities for the site by asking, “What are the ‘must have’ characteristics for the property, and what elements are less critical?” For example, if you must open the facility by a particular date, having a shovel-ready piece of land may be more significant than the amount of space available for parking. Or, if reaching a particular segment of the community is key to the project’s success, you might require land within a specific geographic radius but can be flexible on the lot size.

Many healthcare organizations engage a development partner at the early stages of a project to help them set criteria and evaluate properties with those considerations in mind. Most commonly, healthcare organizations set priorities related to location, lot size, cost and speed to market.

Do: Carefully consider location
Often, the desire or need for a physical presence within a specific geography will drive a healthcare development forward. However, geographic constraints are rarely the only consideration when it comes to facility location. Among other important factors are:
• Visibility to potential patients. Be it a walk-in clinic in an area with high-foot traffic or an outpatient facility with prominent signage at a highway interchange, getting noticed can be critical.
• Proximity to other healthcare access points. Sometimes, a facility’s distance from the other facilities in a particular network is a deciding factor. Other times, proximity to competitors can be a strategic factor in growing or maintaining market share.
• Convenience. Ease of access, parking, and other patient-friendly factors may be high priorities.

Don’t: Skimp on lot size
Ideally, you want a piece of property that can accommodate your development with little or no excess acreage. A healthcare real estate developer can help you narrow property choices to those in an appropriate size range by factoring together required square footage, parking infrastructure, drainage and other considerations.

Unless there are plans for expansion, you should be careful not to over-purchase – thereby using capital that could be deployed elsewhere. However, under-purchasing creates a bigger challenge. When a site is too small, it may force you to adapt your development plan, sometimes to the extent of reducing programs or services if you are unable to make everything fit. Worse, you may have to start over and consider other sites, adding time and cost to the development process.

Do: Consider budget up front
Location, lot size, convenience and other site characteristics will all affect the price of a piece of property. It’s important to know up-front how much capital can be allotted for property so as to keep the overall project on budget. If your budget is tight, you may have to consider compromising on one or more priorities in order to make the dollars and cents work.

Consider, too, that in most cases the overall difference between purchasing and ground leasing a property is minimal when you factor in the long-term lease expense. On the other hand, there can be a major cost difference between building from the ground up and retrofitting an existing building.

Don’t: Underestimate regulatory hurdles
Every property is unique. Some parcels of land may have issues that must be resolved before development can begin – such as zoning code changes, variances, or environmental remediation. Resolving such regulatory hurdles can be time consuming and may be enough to rule out a property if you want or need to move quickly toward project completion. Be sure to understand any potential regulatory hurdles before settling on a property so you can avoid any unnecessary delays or surprises.

Site selection and property development are complex issues with many factors to consider. Keeping these do’s and don’ts in mind can you begin an effective site search process.

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