In a Tacoma commercial real estate market distinguished more by corporate defections than corporate recruitments, two homegrown businesses are providing new light where otherwise there is darkness.
The Tacoma-based nonprofit medical care conglomerates, Franciscan Health System and MultiCare Health System, have become the county’s largest private employers. And in the process they’ve developed a hunger for real estate outside the campuses of their anchor hospitals, St. Joseph and Tacoma General, that is helping fill in some empty buildings left when other employers closed down local offices.
Consider:
• When KeyBank vacated its nationwide call center on Tacoma’s South State Street two years ago and laid off or transferred the center’s 200 workers, Franciscan, parent of St. Joseph, St. Clare, St. Francis, and St. Elizabeth hospitals, stepped in. It leased 75,000 square feet as an employee training and technology center. Some 220 Franciscan employees work there now.
• After Internet travel provider Expedia Inc. shut down its call center in the Horizon Pacific Center at South 21st Street and Pacific Avenue in late 2009, MultiCare filled the gap. The health services company opened its own call center in that vacated space.
• What once was the corporate headquarters of nursing home operator Hillhaven Inc., at 1149 Market St. downtown across the street from the Tacoma Center YMCA, is now Franciscan’s Service Center. Some 315 employees work there in human resources, recruitment and information technology.
• The reflective glass building opposite the Murano Hotel downtown, at one time the home of the local offices of telephone company USWest, is now the Franciscan Medical Group’s administrative office.
• After MultiCare issued a request this spring for proposals for 50,000 square feet of medical laboratory and administrative space with an option to double that space, several downtown property owners presented proposals to the health care conglomerate. Among those was one from Neil Walter Co. The real estate company proposed that MultiCare to become the anchor tenant of the vacant former Russell Investment Group headquarters. That proposal didn’t make the final cut. The hospital is still mulling its site selection, said spokeswoman Marce Edwards.
Puget Sound real estate professionals say the health care industry is one of the few business sectors actively leasing or building the local real estate market.
“It’s good for the business,” said Jeff Lyon, chairman and chief executive officer of the commercial real estate firm Kidder Mathews.
“We’re seeing a steady stream of activity from those health care companies, both in the city and in the suburban areas.”
Mike Hickey, principal with Neil Walter Co. real estate, said the health care industry is one of four areas of growing activity in an otherwise unremarkable market.
The health care business is active when other corporate expansions are still on hold, he said.
With the aging of the baby boom generation, the need for health care is growing despite the rocky economy. Indeed, an inventory of each health systems’ properties shows just how large they’ve grown since the time they were single hospitals.
MultiCare owns or leases property in both Pierce and King counties in 130 different locations. In addition to its four hospitals, Tacoma General, Mary Bridge, Allenmore and Good Samaritan, the nonprofit has 80 clinics, 24 administrative offices and 22 of what it calls program and outreach offices.
In Tacoma alone, where three of its hospitals are located, MultiCare has some 2.13 million square feet of property. That’s almost 10 times the square footage of the Russell Investments Group building, and seven times as much area as Tacoma’s biggest downtown office building, the 25-story Wells Fargo Plaza.
Franciscan owns or leases dozens of properties in Pierce, King and Kitsap counties. Among those are five hospitals, St. Joseph in Tacoma, St. Clare in Lakewood, St. Francis in Federal Way, St. Anthony in Gig Harbor and St. Elizabeth in Enumclaw. The health system operates 94 clinics providing primary and specialty care.
Within the Tacoma city limits, Franciscan controls less property than MultiCare, but still a huge amount, 1.14 million square feet.
While much of Franciscan’s Tacoma property is centered on the St. Joseph campus at South 19th Street and Martin Luther King Jr. Way, the health system has created an administrative complex downtown near South 13th Street and Broadway. There Franciscan fills parts of four buildings. Franciscan’s headquarters occupies the 11th and 12th floors of the 16-story Tacoma Financial Center at 1145 Broadway. The Franciscan Medical Group headquarters is south across South 13th Street. The health system’s service center is a just up the hill on Market Street, and the health system’s marketing, communications, strategic planning and human resources functions are housed in the Broadway Building, just across Broadway from the Tacoma Financial Center headquarters.
While MultiCare’s property is focused on its Tacoma General-Mary Bridge campus at South Fifth Street and Martin Luther King Jr. Way and on its Allenmore complex at South 19th Street and Union Avenue, the health service provider has a large presence downtown. In addition to the 41,000 square feet MultiCare leases in the Horizon Pacific Building, some of its administrative offices are housed in 102,000 square feet of space the hospital owns at 737 Fawcett Avenue. That building is the former Doctor’s Hospital.
In their search for space, the two health care companies have purchased or leased property not originally offices and adapted it for their purposes:
• MultiCare leases the Luther Memorial Church sanctuary at 424 S. I St. for employee presentations.
• Some MultiCare administrative offices are housed in a former nursing home near Tacoma General. Other offices are in the first floor of a former condominium, Chelsea Heights at 603 S. J St.
• Franciscan rents space from the University of Washington Tacoma on the university campus to serve as the university’s health center.
• MultiCare leases parking space from a variety of local businesses and groups. At Allenmore, it leases parking from the Tacoma Elks Lodge, for instance. Downtown, the health care provider leases parking space from the Tacoma Art Museum and Union Station.
The physical and geographic expansion of the two health care corporations is reflective of national trends in health care, said the chief executives of both health care corporations, Diane Cecchettini of MultiCare and Joe Wilczek of Franciscan.
“Health care reform is what has continued to drive the consolidation of health care and will continue to do so,” said the MultiCare CEO.
Both health care groups have expanded their network of clinics and hospitals throughout the South Sound. Those networks are designed to provide a seamless network of referrals from primary to specialty care.
That geographic expansion began in the mid-’90s and continues today, said Cecchettini. Both Franciscan and MultiCare have completed major hospital rebuilding projects this year.
Franciscan built the 25-bed St. Elizabeth Hospital in Enumclaw to replace the former Enumclaw Regional Medical Center. MultiCare completed a major new health care tower at its Good Samaritan Hospital in Puyallup earlier this year. For those two established hospitals, their mergers with the two big health systems was in part financial necessity. Neither had the monetary horsepower as solo hospitals to take on the major capital projects that they needed to keep pace with medical technology. Other expansions such as St. Francis in Federal Way and St. Anthony in Gig Harbor brought hospitals to growing areas where there were none before.
MultiCare is planning to build a fifth hospital soon in King County at Covington.
The property inventory of both hospitals reveals another trend, individual doctors or medical groups merging their independent practices with the health care systems.
Each medical group owns or leases a score of properties it inherited from those independent practices when they joined the larger corporations. The doctors often approach Franciscan about becoming part of the larger health care organization, said Franciscan’s Wilczek.
“We get 10 or 12 inquiries every year,” said Wilczek.
The complexity of insurance and government medical programs and the demands that running a practice make on doctors have motivated many to turn to Franciscan and MultiCare. The medical service companies handle their billing, human resources, insurance and real estate issues and they do what they were trained to do, provide medical care.
As the leases on those doctors’ individual offices expire, the health care conglomerates tend to gather those physicians in offices near or in the hospitals or clinics where they provide services. Although no formal announcement has been made, Franciscan, working with an outside health care office developer, is poised to announce the construction of another medical office building adjacent to the St. Joseph campus.
Franciscan’s Wilczek said the company has located many of its own administrative functions off the hospital campus to preserve that valuable real estate for care providers.
At MultiCare, CEO Cecchettini said her executive offices will continue to be located at Tacoma General. As a former nurse, Cecchettini says she wants to remain close to the place where medical services are being delivered. Don’t expect the Russell Building to become MultiCare Center anytime soon.
John Gillie: 253-597-8663
john.gillie@thenewstribune.com
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