Developers and medical professionals are eyeing space surrounding the Providence Cedars-Sinai Tarzana Medical Center, with the area poised to become a central health care hub for the West Valley.The catalyst, real estate developer Mitch Yankowitz told the Business Journal, was when the joint venture between Cedars-Sinai and Providence Health & Services was announced last March to own and operate the Tarzana hospital, with Providence maintaining controlling interest.Another factor was the continuation of the $524 million Tarzana Reimagined project, an expansion of the Tarzana hospital at 18321 Clark St. As a joint venture partner, Cedars promised to pay 49 percent of the overall cost.
Construction includes a patient tower, outpatient and ambulatory services. The project is scheduled for completion in 2023.With the future of the hospital secure, developers began to look at nearby property for medical offices.“There wasn’t a lot of activity in terms of medical office space in that market for a long time, and then both the (Cedars) project and our project were going through and getting city approvals around the same time,” said Yankowitz, managing partner and co-owner of Medical Asset Management.He’s referring to Cedar-Sinai’s flagship medical offices at 18133 Ventura Blvd., a 40,000-square-foot facility offering a range of cancer care that the West Hollywood-based nonprofit health organization unveiled in January.
At the same time, Yankowitz’s company based in Torrance built the three-story, 90,000-square-foot Tarzana Medical Atrium at 5411 Etiwanda Ave., garnering both Providence and Cedars as tenants. The developer also reserved office space for itself, which will become its Valley headquarters.“By bringing doctors into Tarzana, or maybe you have them splitting time between the mothership in West Hollywood and the Tarzana campus, they’re going to hold onto that patient base and have those services right there for them,” Yankowitz explained with respect to Cedars.The newest project in the Tarzana medical office bonanza is 19500 Ventura Blvd. It’s a two-story, 42,000-square-foot building currently in the remodeling process, with developer Greenbridge Investment Partners investing $7 million into modernizing the building for large medical groups.“Our client, they bought this building in 2014,” said Scott Romick, managing director at Lee & Associates-LA North/Ventura in Sherman Oaks, the leasing agency for the project. “They really wanted a large medical group to take it back then. They had someone looking, but it fell apart. The market shifted and now we’re back to the medical market.”Greenbridge has brought in Michigan-based HED as the architecture firm for the project.“They see it as an opportunity because there’s an empty building there, a lack of office space around. They see the medical community growing, the need for it to grow, and that’s why they adapted,” said Romick.The Lee & Associates principal pointed to other health systems besides Cedars moving into the Valley region over the past eight years, including UCLA Health with its satellite offices in Thousand Oaks, Woodland Hills, Encino and Burbank.US Bank will continue its lease at 19500 Ventura as an “anchor long-term corner tenant,” Romick said; other small medical practices call the building home for now.Difficult conversionsExisting buildings near the hospital will be difficult to sell as “true medical buildings” as is, Romick told the Business Journal. Most of the surrounding properties are mixed use and aren’t equipped to handle medical tenants.“A lot of these buildings that are trying to attract medical tenants are older office buildings and don’t cater to the medical community. They feel that they can get medical tenants because they’re close (to the hospital) and they have the parking,” explained Romick. “You’re at the mercy of the zoning and the demographics, and the existing building structures to begin with.”Yankowitz echoed these sentiments, adding that it would be difficult for Tarzana landlords to meet code requirements for a building solely dedicated to medical tenants.There needs to be more parking, for one, Yankowitz said. An office tenant is allowed three parking spaces per 1,000 square feet, while medical office tenants need to offer five spaces for the same square footage. Then there are different ceiling height requirements, HVAC concerns and a plan for inflow of patients.Romick said there are about 13 other buildings in the surrounding area that could lease medical office space, excluding those owned and operated by Providence or Cedars-Sinai.But medical office buildings, when done right, have a robust referral ecosystem where a patient can see multiple specialists in the same facility.“You have a pharmacist that’s getting referrals from all the doctors in the building for prescriptions; you have primary care physicians who are referring patients to specialists in the building,” explained Yankowitz. “All these medical tenants work together often, referral wise, and it doesn’t really help having a bunch of lawyers and accountants in the building. And same thing for them – they don’t want all these sick people in the building.”Romick, however, mentioned a special one-off case: personal injury attorneys could set up shop near the hospital for referrals of their own.The Atrium on Etiwanda and 19500 Ventura will likely attract different services within the health care industry, mainly due to proximity to the hospital.The Atrium is within walking distance of the hospital campus. Services include a cancer infusion center on the ground floor provided by Providence, Courtyard Pharmacy and Encino-based Centre for Neuro Skills.
The Ventura project is 1.5 miles from the campus, so elective surgeries, rehabilitation and urology are all viable services for its distance to the hospital, brokers said.“Surgery centers can be anywhere within the proximity of a hospital. That’s what we’re hoping to see in the marketplace; we’re going to see more surgery centers, more outpatient facilities,” said Eugene Kim, associate for Lee & Associates-LA North/Ventura out of its Calabasas office.“You still see doctors wanting to be on campus; however, you don’t have to be, with technology and depending on the specialty,” Romick added. “A lot of doctors aren’t going onto the campus on a regular basis.”Medical premiumIf a clinic is within 250 yards of a hospital campus, Yankowitz said, they have better health insurance reimbursement. But rents are higher in an industry that already pays more for its space.Yankowitz said medical office tenants are a sort of golden goose for landlords. They may pay a 20 to 30 percent premium on lease rates; they’re unlikely to move because they don’t want to lose their patient base; and government investment in health care is going “up and up,” he said.Romick added that medical tenants provide a higher return on investment because of their tenure; landlords see higher capitalization rates and higher sale prices for the building.Couple that with Tarzana’s positioning as a health care hub in the Valley, according to Lee & Associates, and it makes sense that landlords such as Greenbridge are investing millions to transform nearby buildings.“Tarzana has always been a smaller office market, it’s not like Encino, Sherman Oaks or Woodland Hills where developers came in and built a lot of high-rises,” added Kim. “It’s always been lower tier, smaller office products, but with recent changes in the Providence project, you’ve seen a lot more of these landlords really look to change the use of their office product and get some medical in there.”Because of its size, Tarzana offers a compactness that could work in favor of its emerging status as a medical and health hub.“If you think about the Valley, you have Tarzana here, you have Encino and Sherman Oaks in a small little hub,” said Romick. “In West Hills, between Tarzana, Calabasas and Agoura Hills there’s not a lot. If COVID has taught us a couple things, it taught us that no one likes to commute. We like things closer to us.”
Hospital Spurs Building Boom
