Egis works with hospitals to generate value from their real estate assets. Among the hospital trusts we’ve worked with are APHM in Marseille, CHU in Amiens, CHU in Toulouse, and APHP in Paris. These interventions often occur in parallel with missions focussed on real estate strategy or as part of new projects. Over the course of these interventions, we’ve learned four major lessons.
Care City | Hospitals and renovation: what to do with former hospitals in cities?
Published 10.07.24
5 mins read
Lesson 1: turning a strong address into a unique property
The properties in question are often of exceptional significance, and refurbishment projects have to be able to transform an emblematic site with strong emotional associations (birth, sickness, death) for the public into a new urban destination.
Hospital sites are singular in many respects. No other type of building packs so much complexity into one place, with a multiplicity of factors - technical (utilities, pollution, diversity of building types etc.), political (heritage, public service, health), land occupancy models (temporary occupancy, or soft frontiers between public domain and hospital property), organizational (governance, organization and coordination of internal and external services) - in play.
Hospitals are highly urban in character, too: hybrids which accommodate both the public and private spheres. Public, because they’re facilities of primary importance, as their size and visibility attest. But private too, because they’re never totally permeable to the public realm: they general operate access control systems, and are places where tranquillity and discretion reign; and they often resemble labyrinths to those who don’t work there every day.
So whatever kind of building we’re talking about - an imposing city-centre infirmary or a more modern, less remarkable building (although for certain architecture lovers that “less remarkable” is open to dispute) - converting an old hospital into something else is no easy matter. And the development programme has to reflect the complexity of the transformation and the history the site encapsulates.
The sites in question often occupy several thousand square metres - the size of a whole new neighbourhood. Dynamic urban contexts should be able to absorb developments of these dimensions. Therefore, if it’s to convince and motivate the developers, the refurbishment programme and the investment model must also be exceptional to offset the difficulty (and costs) of the transformation.
Various strategies have been deployed in this direction, with varying degrees of success. How important is “exceptional”? How do we “fill” the site without creating new frontiers around the new neighbourhood, but at the same time without turning it into a free-for-all? It can be difficult to find the right balance. In Lyon, the former Debrousse hospital was converted into a luxury residential complex, turning the existing architecture and landscaping to maximum account; the development also includes a number of social housing units.
As a new address, the Debrousse complex retains some of its “hospital” associations in the form of social inclusiveness. The Debrousse model is increasingly emulated by hospitals, faced with the increasing scarcity of dedicated healthcare infrastructure and underfunding by the public authorities. Some hospitals choose to redevelop around training, inclusive internment (intergenerational residences, residences for independent seniors), socially-oriented medicine (placement of liberal professionals, recuperation and reintegration centres, hospices for the elderly etc.), the health-related economy (start-up villages, enterprise incubators, tertiary technology such as laboratory services, R&D etc.). Generally speaking, all reflect a concern with integrating the site in the urban fabric in a manner that respects the environment.
Lesson 2: value is a relative concept
The question of value in hospital patrimony is a complex issue, for this value is symbolic in more ways than one.
Firstly it’s symbolic in the sense that although it may not be too high, the many factors cited above (technical, utilities, pollution, heritage etc.) rapidly inflate the costs of refurbishing and restructuring these sites, reducing the potential gains. From a retrospective point of view, some sites even have negative theoretic value.
It’s also symbolic in the sense that hospital trusts are reluctant to sell off their land and properties, whose aura of unsaleability derives from the fact they were purchased in the public interest, or were the result of donations. Either way, they embody a long history. Hence the readiness to defend the value represented by hospital patrimony, even if the potential revenue is tiny in comparison with the gargantuan budgetary requirements of an operating hospital and investment programmes.
And value is symbolic in a third sense too, as it’s vulnerable to the fixations and tensions that tend to emerge when hospital and public administration do not see eye to eye on investment plans.
Lesson 3: alignment of views is all-important
In addition to an attractive programme, the success of a redevelopment on the scale of a hospital site depends on the ability to secure the commitment of the local authorities to the benefits expected from the operation.
Given the urban nature of hospital sites, that requires dialogue with several communities of stakeholders.
Urban planning offices in the first place, and the public authorities in general. Dialogue with the public authorities can be simultaneously “friendly” (both parties are faced with similar financial and operational issues) and “hostile” (when the redevelopment project is hastily put together and poorly integrated).
To make sure a project is aligned with local planning orientations, and more generally to free the hospital from financial risk, sometimes the local authority purchases the site. This is an aggressive strategy, often pursued after difficult negotiations between hospital and local government, and it isn’t always the wisest one to follow. Securing the alignment of authorities and hospital requires prior negotiation on the key points of the project: dominant theme, occupancy density and revenue model, key project milestones in relation to other major projects, method of work, appointment of private operators and policymakers etc. All this notwithstanding, our experience shows that projects succeed when they’re treated as major regional projects, i.e. managed as a partnership, at the highest levels, even when the local authority has not purchased the site.
Secondly, the hospital’s board of directors must engage in dialogue with the community of carers. In many cases this community is strongly committed to the defence of healthcare assets. Finding themselves with depleted bargaining power otherwise, care personnel readily invoke the patrimony question as a way of defending their jobs. The involvement of this community is particularly important - right from the start of the project.
Finally, more conventionally but no less fraught with difficulty, dialogue with the occupants of hospital property (hosted associations, other tenants, holders of temporary occupancy permits), co-owners, neighbouring residents and the public in general is another important element in the redevelopment process.
Lesson 4: the big players dominate the field
The final point is that several factors - the size of the sites, the need for coherence with the surrounding urban fabric, the cost of redevelopment - militate in favour of contractors who are capable of delivering a turnkey project. This was the case, to cite just two examples, of Vinci in the Debrousse project in Lyon, and Eiffage in the Hôtel-Dieu project. But local public operators can also be mobilized to deliver this kind of project, as in Amiens, or with SACVL in the Antiquaille neighbourhood in Lyon. The successful redevelopment of these emblematic sites therefore depends on the savoir-faire (and resources!) of major players in the development sector and their involvement as partners of local authorities and hospital owners.
A new approach to carer accommodation at GHPSJ
From 2017 to 2019 we acted as consultants to Groupe Hospitalier Paris Saint Joseph (GHPSJ) on the technical, political, legal and financial feasibility of redeveloping the Group’s real estate holdings. We put our expertise at the service of the hospital trust’s land improvement operations by preparing and organizing an invitation to tender.
The principal objective was to improve the accommodation conditions of care personnel by redeveloping underused land holdings. The project answered a dual purpose: generating additional revenue to finance the hospital projects of the Foundation, and meeting the accommodation needs of care personnel. It involves investment of 10 million euros for 2,500 m² of floor area.
Given the challenges posed by a site constricted both physically and by the regulations imposed under the local urban development plan, we opted for an occupancy density commensurate with high-quality accommodation, while leaving room for uses connected with the neighbouring hospital facilities. We phased the project to take economic equilibrium and market conditions into account, then consulted with developers and funding institutions on two scenarios: refurbishment of the existing buildings, or demolition-reconstruction.
The project required complex coordination of technical, political, market, regulatory, financial and real estate factors. After that we prepared a development and legal package to ensure the success of consultations with developers: respecting at the same time the wishes of the Foundation to remain long-term owner of the site, and its desire to offer quality accommodation to its staff.
Rose MegardStrategy Director - Consulting & Operations
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