The ICRE Investment Team recently attended the Bisnow Healthcare Conference in Scottsdale, Arizona, and one message was clear: healthcare Commercial Real Estate is evolving rapidly. From outpatient growth strategies and adaptive reuse to AI-driven workflows and mixed-use healthcare ecosystems, industry leaders shared actionable insights that will shape medical office, ambulatory surgery center (ASC), and healthcare development strategies across Arizona and beyond.
Below is a structured recap of the panel discussions, speakers, and key takeaways impacting healthcare real estate investors, developers, lenders, and providers.
Balancing Flexibility and Speed in Healthcare Development
Panelists: Nina Armstrong, Jamie Northam, Tara Brown, Ryan Rogers, Austin (Design & Construction Leaders)
Flexible Design is No Longer Optional
Healthcare systems are prioritizing adaptable medical office space that can shift between primary care and specialty uses without major renovations. Multi-use exam rooms, scalable operating rooms, and telemetry-ready infrastructure were highlighted as critical components of future-proof healthcare buildings.
The takeaway: Early investment in flexible design reduces long-term capital expenditures and protects asset value. In today’s outpatient-focused environment, flexibility directly supports profitability.
Speed to Market Through Integrated Collaboration
Design-build integration was a consistent theme. Successful healthcare development requires early collaboration between architects, contractors, brokers, healthcare systems, and local authorities. Panelists emphasized parallel regulatory reviews, modular construction, and early contractor involvement to compress timelines.
Delays in decision-making during construction almost always result in costly rework. Early “design freeze” alignment protects budgets and schedules.
Adaptive Reuse and Redevelopment in Healthcare Real Estate
Panelists: Tara Brown, Jamie Northam, Ryan Rogers
Repurposing Office and Retail into Medical Use
With land constraints tightening, especially in suburban growth corridors, developers are increasingly converting office and retail properties into outpatient healthcare facilities. However, zoning, parking ratios, structural layouts, and building codes can quickly derail feasibility.
The takeaway: Early professional input from land-use attorneys, architects, and brokers is critical before site acquisition. Physician groups often underestimate conversion costs, particularly when transitioning to higher-acuity uses.
Managing Change and Renovation Complexity
Renovating inpatient facilities to meet updated standards can reduce licensed bed counts and disrupt revenue streams. Phased construction strategies allow hospitals to remain operational during renovations, preserving income while modernizing space.
Capital planning must balance short-term construction costs against long-term operational efficiencies.
Outpatient Strategy and Right-Sizing Healthcare Facilities
Panelists: Multiple Healthcare System Executives
Outpatient Growth is Driving Demand
Healthcare providers are aggressively expanding outpatient services to reduce inpatient costs and respond to evolving payer models. Extended clinic hours, improved scheduling efficiency, and community-based medical office development are central to this strategy.
Outpatient facilities not only reduce system costs but also improve patient access and convenience—two critical competitive advantages in today’s healthcare landscape.
Right-Sizing Through Data and Analytics
Panelists stressed that healthcare real estate decisions must be driven by patient volume projections, payer mix analysis, and throughput modeling. Overbuilding can strain capital; underbuilding restricts growth.
Repurposing inpatient space into outpatient uses can increase profitability without new ground-up construction—if properly analyzed.
Prefabrication, Modular Construction, and Project Delivery
Panelists: Ryan Rogers and Construction Leaders
Where Prefab Works—and Where It Doesn’t
Prefabrication shows strong value in repeatable components such as headwalls, bathrooms, and mechanical rooms. It reduces onsite variability and can shorten construction schedules.
However, modular construction struggles financially for large hospitals and smaller clinics due to logistics and upfront costs. It appears most viable for freestanding emergency departments or large-scale projects with economies of scale.
The takeaway: Prefab is a tool—not a solution. Success depends on balancing standardization with physician customization preferences.
Operational Efficiency, Workforce Shortages, and AI Integration
Panelists: John Walt, Operational Strategy Leaders
Designing for Staff and Patient Experience
With healthcare workforce shortages intensifying, facilities must prioritize staff wellness and operational flow. Natural light, retreat areas, and efficient layouts are no longer luxuries—they are recruitment tools.
Standardized exam rooms reduce staff training time and improve throughput. Efficient outpatient design directly impacts financial performance.
AI Will Reshape Healthcare Facility Design
Artificial intelligence is expected to significantly reduce physician administrative burdens through automated dictation, imaging analysis, and workflow routing. This may fundamentally alter space requirements, waiting room sizing, and operational bottlenecks.
Facilities built today must anticipate AI-driven workflow disruption over the next five to ten years.
Healthcare Ecosystems and Mixed-Use Innovation
Panelists: Steve Lester, Eric Gonzalez, Julie Johnson
Culture and Partnerships Matter
Speakers emphasized that healthcare investment is increasingly about people and culture—not just products or buildings. Lenders now evaluate projects through the lens of operational performance, referral networks, and payer stability.
The real estate asset supports the healthcare enterprise—not the other way around.
Medical Villages and Innovation Hubs
Developments like integrated healthcare villages combine outpatient clinics, ASCs, wellness amenities, daycare, and healthy dining. These ecosystems improve patient experience while creating financing stability through diversified tenant mixes.
Innovation hubs were highlighted as the next frontier—blending research, clinical care, and healthcare manufacturing into collaborative environments that accelerate commercialization and economic development.
Capital Markets, TI Costs, and Lease Structuring
Tenant improvement (TI) costs were identified as a major underwriting risk, ranging from $120 to $250+ per square foot, with specialty builds reaching significantly higher. Developers prefer gray shell delivery with finalized TI budgets after pre-leasing to mitigate exposure.
Longer lease terms (7–10 years) are standard to amortize high build-out costs and provide lender confidence.
Despite interest rate volatility, lenders remain supportive of medical office and healthcare allocations for 2026–2027. The primary bottleneck today is regulatory and process friction—not capital availability.
Final Takeaways for Healthcare Commercial Real Estate
- Flexible design protects long-term asset value.
- Integrated collaboration reduces costly rework.
- Outpatient growth will continue driving suburban healthcare development.
- Adaptive reuse offers opportunity—but only with early feasibility diligence.
- AI and workforce pressures will reshape facility design.
- Healthcare ecosystems and tenant synergy improve financing and marketability.
As a Healthcare Real Estate expert and Senior Vice President at ORION Investment Real Estate, Michael Douglas, works exclusively with physician groups, healthcare operators, and investors across Arizona to align real estate strategy with long-term operational and financial goals. Whether you’re evaluating a medical office acquisition, planning a ground-up development, restructuring a lease, or exploring a larger healthcare advisory initiative, our team provides data-driven guidance backed by deep market experience and CCIM-level financial analysis.
If you’re navigating a Commercial Real Estate transaction or need strategic Healthcare Advisory Services—from site selection and entitlement strategy to capital planning and disposition—let’s connect. The ICRE Investment Team is built to support healthcare clients at every stage of the real estate lifecycle with clarity, precision, and long-term vision.
