From Blueprint to Bedside: Putting Healthcare Property under the Microscope

Developing Healthcare Property

When you visit a medical facility, you may not pay too much attention to the design and operation of the building. However, every aspect of your journey through that building will likely have been deliberately designed to make your experience as safe and comfortable as possible. Regulatory compliance, patient safety, accessibility, seamless workflows and the overall patient experience are at the forefront of designers' and operators' minds as they seek to create a welcoming and clinically efficient space.

But what about the legal arrangements? They too need to be designed to allow for optimum functioning of the space by being flexible and responsive to evolving clinical need and innovation in the delivery of care.

In the first in our series From Blueprint to Bedside, we put the development of healthcare property under the microscope, examining the unique complexities of developing a property for healthcare use.

Developing Healthcare Property: Key Considerations at the Development Stage

Building a property for healthcare use in a heavily regulated environment can be expensive and complex, requiring an experienced contractor and professional team. Converting a property for healthcare use can be even more so. Even more complex still is the development of healthcare property within a multi-let mixed-use building (or shopping centre, such as Affidea's plans to open a medical centre within the Wimbledon Quarter retail destination later this year). Due to the comparatively more limited supply of properties suitable for healthcare conversion, and the shift from hospital to community care (as per the NHS 10 Year Plan), this trend of healthcare within mixed-use developments is only likely to increase.

So what are some of the key considerations for developing or converting a property for healthcare use?

1.         Planning and Other Consents

The first consideration is the nature of the works and the planning and other consents which will be required. Although (depending on the proposed use) the 2020 Use Classes Order changes mean that planning permission for a change of use is less likely to be required than had been the case previously, landlord consent for change of use, and both planning permission and landlord consent for redevelopment or conversion works, are still likely to be required.

2.         Nature and Extent of Works

Works to develop a property for medical use will likely be far more extensive than a typical office or retail fit-out, often requiring alterations to structural parts of a building to install equipment and services and temporarily removing external walls to bring in MRI or CT scanners or other larger pieces of medical equipment. Concrete bunkers or faraday cages may need to be constructed to contain or shield medical equipment, which requires expert engineering support. Consideration also needs to be given early on to how that equipment will be replaced and access routes and soft spots designed. With the life of most diagnostic equipment being shorter than the term of a typical healthcare lease (and rapidly improving technology), if your property is leasehold it pays to have those discussions with the landlord from an early stage.

3.         Dilapidations and Reinstatement

With a leasehold property, the extensive alterations required mean that dilapidations liability can be substantial and that will be a point for negotiation with the landlord. If reinstatement is required, it will take longer than reinstating a normal office or retail fit-out, and the time and cost of that needs to be factored in.

4.         Equipment Delivery Strategy

The strategy for delivery of large pieces of medical equipment is critical to get right (and expensive to get wrong). Suppliers will dictate detailed specifications for the condition of the space where the equipment will be installed, but the room itself may not be able to be completed at the point of delivery (e.g. if a dividing wall can only be erected following installation of the equipment), creating complexities of taking over space in an otherwise operational construction site. All of this needs to be considered carefully and reflected in the building contract.

5.         Building Services and Resilience

In terms of building services, air handling systems will be complex to meet regulatory requirements. Resilience and redundancies need to be included at every stage to ensure there is no interruption to the delivery of care. This requires more space to be found for plant and machinery, so innovative design is needed to maximise operational space. 

6.         Power Supply

Power is another early gating item. Diagnostic equipment consumes significant power, so it needs to be confirmed early on that the necessary power for operation of the proposed medical use is available or can be obtained. For a leasehold property in a multi-let building, there needs to be sufficient power available without reducing the available power to the rest of the building. Backup power sources are also needed to guarantee continuity of care in the event of a power failure; this may need planning consent and comes with environmental considerations.

7.         Technical Requirements

In addition to the usual building regulations and other requirements, properties designed for healthcare use need to take into account the NHS England Health Technical Memoranda (HTMs) and Health Building Notes (HBNs) guidance documents, which set out best practice for designing, building and engineering healthcare facilities. The Building Safety Act 2022 provisions relating to higher-risk buildings may also be applicable during the construction phase (although hospitals are excluded from the provisions of the Act in the operational phase).

Looking Ahead

With the UK's ageing population and continued pressure on the NHS, the independent sector will continue to fuel the demand for high-quality medical space and properties suitable for conversion. All of the above considerations need to be accommodated at the very early stages of planning to ensure that the property can operate optimally. The overarching principle is simple: the efficient provision of patient care is fundamental and the physical design and legal arrangements need to be led by that, not the other way around!

Please get in touch with the Herbert Smith Freehills Kramer team if you'd like to discuss further.