Some New Medical Office Buildings Struggling to Find Tenants

By Mike Pramik, The Columbus Dispatch, Ohio

Aug. 4–Construction of medical office buildings is all the rage in central Ohio and around the country as the health-care industry continues to expand.

But some of the offices around Dublin Methodist Hospital might be in need of defibrillation.

While the hospital slowly increases its patient count, the attached medical office building developed by Daimler Group sits nearly empty more than half a year after the hospital opened.

Bob White Jr. with Daimler Group said he thinks the area around the hospital was built up a little too quickly. Several medical office buildings along Perimeter Drive near the hospital also are seeking tenants.

“The zeal for developers to build medical offices in and around the Dublin Methodist Hospital probably led to an overbuilding compared to what the true demand is for space there,” White said.

“As the hospital continues to ramp up and work out all their deals with physicians, and everything else with on-call services and surgery and scheduling, there will be continued increased activity out there.”

But that’s not stopping medical offices from popping up around central Ohio.

For example, the Ohio State University Medical Center is negotiating with Daimler to lease the company’s office building at Gowdy Field, just south of the Time Warner headquarters. Medical Center spokesman David Crawford said the matter could go before the OSU trustees as early as September.

OSU plans a general rollout of outpatient treatment centers, and that is “the largest possibility” for the Daimler building, should the medical center lease it, he said.

One goal of that effort is to make outpatient care more accessible, said Dan Like, chief operating officer of ambulatory services for the OSU hospital. Services could include eye surgery, plastic surgery, women’s health care and ear, nose and throat treatment.

Meanwhile, White said those taking note of the nearly empty hallways at the Dublin hospital’s office building need to be patient. It’s not easy for health-care practices to pull up stakes and relocate. Many are small businesses and need to wait for leases to expire before they move.

Daimler has had quicker success with its two-story medical office building at 6670 Perimeter Dr. It’s nearly full, as the developer sold off the space to practices such as Ohio Gastroenterology Group and Mount Carmel Columbus Cardiology Consultants.

One developer said it has been able to sell its medical office condos in the area.

Ray Boll, with R.J. Boll Realty Ltd., said he has sold eight of the nine small offices his company developed at its Perimeter Place project.

“Leasing is slow. Selling has not gone slow,” Boll said. “Doctors want to own now so they can get appreciation and not throw money down a rathole in leasing.”

Boll also developed a 15,000-square-foot medical office for Midwest Retina, which plans to move from Main Street Downtown to 6655 Post Rd.

Sometimes, finding tenants for these spaces is difficult because of a tight credit market.

For example, Bedrock Group developed a two-story medical office building at 6810 Perimeter Dr. It filled the first floor but not the second.

Developer Todd Holstlaw with Bedrock Group said many small health-care companies are having a hard time coming up with the money to expand or relocate.

“The real reason is the stringent lending market we’re currently in,” he said. “You can get the best deal out there, but your tenant can’t get it financed.”

Making matters more difficult at the building attached to Dublin Methodist Hospital is that tenants must be affiliated with OhioHealth, the hospital’s parent company. Spokeswoman Lara Lindsay said 15 doctors are in the 100,000-square-foot building.

From a business standpoint, “You don’t want to be in a situation where you’re at capacity from Day One, but you also can’t be in a situation where you have less than half the building filled,” Like said.

Warehouses coming down

Nationwide Realty Investors soon will tear down two buildings at the former Big Bear warehouse site in Grandview Heights where it’s planning the $500 million Grandview Yard. But that doesn’t mean it’s ready to begin redevelopment of the industrial complex, said Nationwide Realty President Brian Ellis.

The company will begin demolishing the 516,000-square-foot warehouse at 770 W. Goodale Blvd. this month. The warehouse, which faces Gowdy Field, consists of two buildings connected by a small walkway. Nationwide Realty will save the large Big Bear sign just in case it’s useful.

However, Ellis said, the buildings have no future in Grandview Yard.

“They’re more expensive to keep up than they are to tear down,” he said. “It’s summertime, and the timing is good for us to knock down those buildings.”

Mike Pramik covers development for The Dispatch. Contact him at mpramik@dispatch.com or by fax at 614-461-5107.

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