A rendering of the future Arkansas Children's Northwest hospital in Springdale
Health care is getting bigger in northwest Arkansas and that is good news for everyone.
Northwest Arkansas has seen a significant spike in medical facility construction in recent years, most notably Mercy Hospital Northwest’s $247 million expansion project and the soon-to-open $167 million Arkansas Children’s Hospital Northwest in Springdale. Washington Regional Medical Center in Fayetteville also recently completed a $46 million expansion.
Those projects aren’t just boons for construction and engineering companies responsible for creating the new hospitals and clinics. Development experts say that hospitals are a great magnet for other retail and residential projects, such as restaurants, service companies and apartments.
One area that should be fun to watch grow in the years to come is in Springdale just north of the newly constructed Don Tyson Parkway. In 2008, Arvest Ballpark opened as the home for the Double-A Northwest Arkansas Naturals in an otherwise empty expanse just west of Interstate 49.
In January 2018, Children’s Northwest is scheduled to open its 230,000-SF facility on 37 acres a stone’s throw away from Arvest. Northwest Arkansas Community College has plans to build and open a Springdale campus in the same area.
“You think about in 10 years what that place is going to be like, the possibilities,” said T.J. Lefler, an executive vice president at Sage Partners in Fayetteville. “More people want to be over there every day. Office, medical and retail are all growing around that particular area.”
Marshall Saviers of Sage Partners helped put BNSF Logistics in a new 30,000-SF headquarters on South 48th Street in Springdale, almost directly across the interstate from Children’s Northwest. The office opened in December 2015 with nearly 200 employees, and the site was chosen before the hospital plans were publicized.
BNSF “didn’t follow it; we were fortunate enough to be ahead of Children’s Hospital,” Saviers said. “We didn’t know they would be across the highway. We didn’t do it because of Children’s, but what we have seen is all the land around it go up significantly in value since Children’s has been completed.
“It adds another amenity to the area. With that, you’ll have a lot more retail and restaurants in the area, and obviously offices as well.”
Direct and Indirect Influence
The direct results of a hospital’s expansion or creation are pretty clear on an accounting ledger. Mercy’s $247 million expansion and Children’s Northwest’s $167 million creation put money into the pockets of architectural firms and construction and engineering companies and all the workers who are employed by them.
Mervin Jebaraj, the interim director of the Center for Business & Economic Research at the University of Arkansas’ Walton College of Business in Fayetteville, said health care was responsible for approximately $1.5 billion in economic activity in northwest Arkansas in 2015. That doesn’t include all the money spent on construction, and the effects of Mercy’s and Children’s Northwest’s additions might take a while to register for research purposes.
Mercy said its expansion will add 1,000 jobs, and Children’s Northwest said it would hire 250 employees.
“We’re definitely seeing a lot more economic activity in the health care sector here in northwest Arkansas than we have at any time before,” Jebaraj said.
Ramsay Ball, a principal with Colliers International, said the two major hospital projects should have different direct effects. Where a hospital such as Mercy or Washington Regional Medical Center exists, the surrounding area has a certain familiar look: doctors’ clinics, physical therapists’ offices, dental offices and so on.
“Hospitals, especially now, are generating a lot of clinics and urgent care and other facilities,” Ball said. “There has been a trend recently for doctors to go to work for hospitals. Hospitals have become more important in setting up clinics and other facilities. They tend to group around hospitals.”
Lefler agreed.
An investor “will say, ‘Maybe I can build a building that a supplier to the hospital will need or the doctor who wants to be next to the hospital,’” Lefler said. “Springdale is seeing that. We’ve done some work with Mercy, so we see that as well. They want to be near. Hospitals go based on where doctors need to be. It’s really doctor-focused.”
Children’s Northwest, as a speciality hospital for the treatment of children, may result in less of a medical park community. Its surrounding area may be more generic with service and retail sites.
“Health care is such a critical part of our economy now that we’ve seen more and more health care expansion, Ball said. “That drives a need for restaurants, lodging and stuff like that. There’s a whole potpourri of services that hospital populations directly drive.”
Location Opportunities
Saviers said there are many reasons hospitals are a popular driver of developments. The most obvious is that hospitals generally create a plethora of well-paying jobs.
“Food services is a big one because you’re going to have a lot more people drawn to the area,” said Saviers, who is also a member of the executive committee of the Northwest Arkansas Council. “Even your service guys — your dry cleaners, your insurance guys, the guys who are servicing other people in the area — because of the mass of people in the area, that will create more service opportunities.”
Ball said he had a client with a restaurant in the uptown Fayetteville area that did good business with the Washington Regional crowd. That area is also well developed with a mall, movie theater, two new apartment complexes under construction as well as myriad restaurants.
“Things that are close to Washington Regional or Mercy, I don’t know if they are the primary driver, but they certainly drive a lot of business — living, eating, shopping, all the things that people do,” Ball said. “That creates a need for more and more services in the area, everything from people serving at restaurants and attorneys and accountants and folks like that.”
Saviers said when developers talk to him about finding property for projects, they ask about the areas where hospitals are located. They don’t necessarily want to be next door, but they want the same mail carrier.
“They don’t zero in on the hospital; they zero in on the area because of all the amenities that a hospital brings,” Saviers said. “You’re going to have restaurants and services follow. We do a lot of traditional office and retail sector, and those guys follow hospitals.
“Also, hospitals usually pick a really good location with good access and close to amenities. You don’t get a lot of people who say I want to be right next to Children’s, but they do say I want to be in the area where Children’s, Arvest Ballpark and NWACC’s new campus are. It’s a big component of where people want to be.”
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