Is healthcare built environment the next frontier for developers?

The newly constructed state of art mother child care unit at Nakuru Level Five hospital. [Caline Chebet, Standard]
When Dr Sam Thenya sat on a panel that discussed real estate investment opportunities in Kenya at the just-concluded East Africa Property Investment summit in Nairobi, many delegates were visibly taken aback. Ordinarily, such a panel would be a preserve of developers and other key property industry players.

Dr Thenya, the founder and director of strategy of Nairobi Women’s and Children Hospital Group, was here to discuss growth areas in the healthcare built environment as well as demonstrate how developers could partner with medical institutions in constructing customised facilities.

“Did you know that medicine and related studies are the only courses that cannot be learned online unlike many other professions?” said Dr Thenya during an interview in his office on Monday. “Healthcare will always require physical infrastructure. That presents endless opportunities for developers.”

In 2001, Dr Thenya, together with like-minded individuals, took over a hospital that was being auctioned in Nairobi’s Hurlingham to handle sexual abuse victims with more decorum rather than treat them as any other medical cases. Today, the hospital boasts nine such facilities.

“Medical infrastructure is more than just a hospital. There is the storage of medical supplies and warehousing of equipment that must meet stringent safety criteria. We also need to build training institutions to address the serious shortage of human resource in the industry. Somebody will have to build such facilities,” he said.

All the buildings hosting the nine hospitals operated by Nairobi Women’s and Children Hospital belong to private developers. Over the years, Dr Thenya has been working with developers and structure owners willing to convert their buildings into healthcare facilities in different parts of the country and has signed long-term leases.

He said the demand for such facilities is higher than people think, adding that developers only need to look at the state of key hospitals that were developed decades ago. Almost all of them, he said, have small clinics in city suburbs and satellite towns. Unfortunately, he said, most of the clinics close down in the evening, leaving patients with little options while a proper, well designed facility, needs to operate around-the-clock.

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According to Ministry of Health, Human Resource Strategy Document 2014-2018, 42.9 per cent of the total health facilities in the country are owned by the government, while private sector accounts for 37.8 per cent and faith-based organisations 11.4 per cent.

But the question is: Would building medical facilities make business sense for private developers?

“Yes, if structured properly,” said Dr Thenya. “Unfortunately, what we have on the local real estate scene is the “monkey see, monkey do” mentality where a developer just copies the nearby model without considering all the details.”

Dr Thenya said there are several development models that developers can consider as they look for opportunities in the health segment.

First, they can enter into public-private partnerships with national and county governments for the development and operation of those facilities. In this way, he said, the two levels of government do not need to put in much cash into such projects that then remain idle for lack of facilities and trained workforce.

Second, developers can partner with faith-based organisations that sit on large tracts of land but have limited resources to develop medical infrastructure.

Third, developers can enter into joint ventures with landowners and a health operator for the development of a facility. The parties can then enter into a long-term lease agreement that guarantees all parties a full return on investment.

It all sounds good, yet developers may not jump in just yet.

Lee Karuri, developer and chairman of Resorts and Cities, says medical facilities such as hospitals are specialised units that require unique, cost intensive customisation. He says in case of some misunderstanding at any point during the process, retrofitting the structure may present challenges to the developer.

“A developer may consider this an unsafe zone due to fear of the unknown. That is why many opt for commercial office space where they can lease each floor to a different entity and thus spread the risks. Perhaps higher demand levels will make developers consider the option,” says Karuri.

On the other hand, Peter Kibinda, an urban planner, says our urban areas should have more health facilities than what we have currently. He says planning regulations require developers to set aside at least 10 per cent of land for such social amenities.

“Owners of huge parcels of land could actually apply to build such facilities. Comprehensive development plans used land size and projected population density to determine the size of facilities such as hospitals to be constructed,” says Kibinda. 

However, greed and the long registration process have made such parcels of land “disappear” or reduce in size. In many private estates, developers have used such land to construct more houses “since residents may not even be aware of its original use”.

Developing health facilities is obviously a big deal for Dr Thenya who has trained his sights on yet another of his pet projects: developing homes for the elderly. For now, though, he will have to convince skeptical developers that investing in health facilities is a feasible idea.  

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