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Healthcare Options Abound in Fast-Growing El Paso Area

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Scott Herbold, CBRE

Pedro - 01

Pedro Nino Jr., CBRE

El Paso is a thriving community with active investments across the area ranging from redevelopment of its downtown to new infrastructure across the city.

Notable for being the safest city in the Unites States, El Paso is the sixth largest city in Texas and a vital part of one of the largest borderplex metropolitan economies in the world.

The city is the focal point of more than $88 billion of the $530 billion annual trade between the United States and its third largest trading partner, Mexico.

But trade isn’t the only industry thriving in El Paso, other sectors such as education and healthcare continue on a strong path forward given stable population growth and a significant military base.

The City of El Paso has a population just over 679,000. Its metropolitan statistical area, composed of El Paso County and the more recently added Hudspeth County, is home to over 837,000 individuals. The area is projected to grow to nearly 863,000 residents by 2016.

Historically, El Paso is among the fastest-growing metropolitan areas in the nation with an average growth per decade of 21 percent from 1960 to 2010.

According to a recent report by the UTEP Border Region Modeling Project, El Paso is projected to reach a population just shy of one million by 2029.

When El Paso data are combined with data from sister city Ciudad Juárez, whose population is over 1.4 million, and the Las Cruces MSA, whose population exceeds 217,000, the greater El Paso/Juarez/ Las Cruces region composes an estimated combined statistical area of 2.5 million individuals.

This U.S./Mexico borderplex region is the most populous in Texas and second in the nation only to the San Diego/Tijuana borderplex over 700 miles away.

El Paso is also home to Fort Bliss, one of the largest military complexes of the United States Army. It is estimated that in the last decade alone, Fort Bliss has tripled in size, making it the biggest base transformation in history.

According to the U. S. Department of Defense, Fort Bliss is currently home to 91,817 active duty, reservist, family members and civilians.

The post supports a population of over 170,000, including veterans, retirees and family members. UTEP’s Institute for Policy and Economic Development estimates that Fort Bliss positively impacts the region through $6 billion of business output, 62,000 employees and $4.2 billion in compensation and labor income.

While there is no denying that manufacturing and transportation logistics on both sides of the border are major regional economic drivers, recent investments and employment data show growth in other El Paso sectors as well.

According to U.S. Census Bureau data, El Paso’s education and healthcare employment sector has seen a 61 percent increase in the number of jobs since 1990.

Healthcare Landscape
The city of El Paso continues to benefit from the long-term commitment of several high-profile healthcare systems and institutions:

• Texas Tech University Health Sciences Center at El Paso, including the Paul L. Foster School of Medicine, provides a four-year medical school program through its affiliation with University Medical Center of El Paso.

• University Medical Center of El Paso, a teaching hospital that is part of the El Paso County Hospital District, serves as El Paso’s only not-for-profit, community-owned healthcare system and the area’s only Level 1 trauma center.

• El Paso Children’s Hospital opened in 2012 with capacity for 122 beds over 10 floors and is supported by the University Medical Center and School of Medicine at Texas Tech.

• The federal government has awarded a $650 million contract for the new William Beaumont Army Medical Center at Fort Bliss, which will include over 1.1 million square feet, 135 beds, 10 operating rooms, 30 specialty clinics and over 250 exam rooms. The city has two of the most prominent hospital systems in the country serving the healthcare needs of El Paso and the surrounding counties, including:

• HCA, based in Nashville, Tennessee, is the largest hospital system in the country and owns and operates two acute-care hospitals in El Paso: Del Sol Medical Center in east El Paso and Las Palmas Medical Center in west El Paso.

• Tenet Healthcare Corp., based in Dallas, is the city’s largest hospital system, employing more than 4,000 people at four hospital campuses, with an additional campus under construction. After operating under the Sierra Providence Health Network for 20 years, Tenet rebranded the operator as The Hospitals of Providence in August 2015.

The hospitals have been renamed as well, to include the Memorial Campus, Sierra Campus, East Campus and Providence Children’s Hospital. The Transmountain Campus is projected to open in early 2017 on the far west side as a 140-bed teaching hospital partnering with Texas Tech’s Health Science Center.

Service providers will continue to offer more specialized care in facilities designed for specific patient needs. El Paso already has several specialty hospitals, including those for surgery, rehabilitation and mental health.

Long-term acute care hospitals (LTACHs) also fall into this category, providing long-term coordinated and intensive care for medically complex conditions such as post-stroke, pulmonary ventilator care and challenging wound care issues. Those specialty facilities include:

• El Paso Specialty Hospital is a 31-bed, physician-owned hospital in the National Surgical Hospital network, conducting specialty procedures that include joint replacements.

• East El Paso Physicians Medical Center (Foundation Surgical Hospital of El Paso) currently has 18 beds with a capacity to add 22 more, with procedures that include gastrointestinal surgeries.

• Highlands Regional Rehabilitation Hospital (41 beds).

• Las Palmas Rehabilitation Hospital.

• Kindred Hospital El Paso — a 62-bed LTACH.

• El Paso LTAC Hospital — a 34-bed LTACH.

• Triumph Hospital of El Paso — a 29-bed LTACH.

• Mesa Hills Specialty Hospital — a 32-bed LTACH.

• El Paso Psychiatric Center — 74 beds providing inpatient adult, adolescent and child services.
Capital Markets

Healthcare facilities have become an accepted asset class for private and institutional investors over the last decade. While this asset class previously traded at a discount compared to standard office assets in similar markets, the discount has disappeared and a premium is paid for certain newer properties with strong credit tenants.

Pricing trends reflect the future viability of these properties, showing that newer properties, with larger suites and higher parking ratios command greater tenant interest, which leads to stronger and more competitive pricing. There is an increasing focus on the financial health (credit) of each tenant.

Trends in Service, Facilities
The business of providing healthcare services is rapidly changing from the pressures of consumers, federal and state legislation, and fiscal responsibility. Significant consolidation is occurring in the forms of acquisitions and affiliations. The most visible and tangible change to the consumer has been the proliferation of urgent care facilities, which can be affiliated with a hospital system or urgent care network, or be independently owned.

Another significant driver of healthcare facility construction is the result of hospital operators pushing their brand and facilities out to be more convenient to the consumer. Hospital-branded primary care clinics and fully licensed 24-hour emergency departments are offshoots of this trend.

Lastly, it is easy to notice more physician practices relocating to retail properties.
Increased focus on preventative care and consumers’ desire for quick and convenient access to services near work or home are driving this trend.

Typical practices seen in retail settings are primary care, pediatrics, allergists and dentists.

— By Scott Herbold, first vice president, and Pedro Nino Jr., research analyst, CBRE. This article originally appeared in the September 2015 issue of Texas Real Estate Business.

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