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Medical Office Project Meets Demand for New Space

Daniel Kashani, CEO of Pacoima-based TriStar Realty Group LLC, sees the future in the proposed mega medical office project he calls his “baby.” The nearly 112,500-square-foot building is planned for a 2.4-acre parcel fronted by Ventura Boulevard in Tarzana. The project, called The Ventana, would be built for outpatient and administrative uses and aims to fill a need for new stock in the area’s aging medical office market. “The individual doctor’s office has kind of gone away,” said Kashani, 32. Indeed, demand for medical office space is increasing and Valley area developers are responding with proposals and projects. Doctors are scouting for offices that offer flexible floor plans, area brokers say. Hospitals are looking to blunt rising health care costs by moving some health care services and administrative functions off the hospital campus and into a lower cost setting. About 70 percent of procedures currently are done on a hospital campus, said Bryan Lewitt, Southern California practice leader for CBRE Group Inc.’s health care services group. “In the next five to 10 years that number will be flipped. Seventy percent of procedures will be done off campus,” he said. Even without much marketing, leasing interest for The Ventana has been high, Kashani said. Brokers with CBRE are leasing the project. Negotiations are underway with a medical imaging company and the hope is to lure the company to the site as an anchor tenant, Kashani said. He said he’s also had discussions with Providence Tarzana Medical Center about potentially taking space. There are several factors driving demand for medical office facilities located off hospital campuses, including rising health care costs. “Hospitals are looking at doing business and real estate quicker (and) leaner,” said Jason Clark, managing director for health care solutions at Jones Lang LaSalle. Health care reform promises to add 30 million to the insurance rolls, which may fuel the growing demand for real estate, though Clark said that demand has been overstated. Additionally, increasingly doctors are selling their practices to hospitals, larger medical groups and health care insurance companies to remain competitive and gain negotiating power in the face of declining reimbursement rates. In this kind of market, Lewitt said, newer buildings are more attractive to medical users because they can more easily accommodate the larger, more flexible floor plans needed for the combined practices. Kashani hopes to cash in on providing such flexibility. Offices at The Ventana will be built to suit tenants’ individual needs and desires, he said. The modern-style building also calls for about 4,200 square feet of retail space, which could include a pharmacy and an eatery. The project is winding through the city’s development review process. It is expected to be reviewed by the City Planning Commission in late June. In order for it to move forward the Planning Commission, along with the City Council, must approve the project. If approved, groundbreaking is expected during the first quarter of next year, and the building should be ready for occupancy during the third quarter of 2014, Kashani said. Providence Tarzana has backed the proposal. Physicians have expressed a desire to be closer to the hospital and have medical offices that can fulfill their needs as they increasingly share office space to gain efficiencies, said CEO Dale Surowitz. Plus, as space fills up at Providence Tarzana, it’s “a more convenient alternative” to move some services out of a hospital setting — making room for needed inpatient care — instead of building costly new hospital additions, he said. Kashani’s project has gone through several iterations since he bought the parcel at 18131 Ventura Blvd. in 2008. Although the Tarzana Neighborhood Council liked the idea of a medical office building at the site, the council raised concerns it was simply too large for the area, prompting Kashani to trim his proposal. “We originally said ‘No. It’s too big,’” said Kathy Delle Donne, chairperson of the Tarzana Neighborhood Council’s land use committee. But with Kashani’s revisions, which included shaving about 26,000 square feet, the neighborhood council has climbed aboard. In late April, it voted to approve the development. Although approval from a neighborhood council is not necessary, it carries political heft as a project moves through the approval process.

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