The Business Journal’s issue of Aug. 16 featured a front-page article about Beverly Hills’ limits on medical office space (“What’s Up, Doc? Rents, as Beverly Hills clamps down on med space”) as well as a Comment column on the topic (“Beverly Hills’ Bad Medicine”).
Since I am the former city manager of Beverly Hills and the person who started the discussion on the medical office issue, I have the obligation to explain it. The issue has nothing to do with an aversion to medical uses. It has everything to do with the long-term economic health of Beverly Hills.
Cities today, with severe limitations on their taxing authority, must look at land use from a perspective of establishing a sustainable economy with as much diversity as feasible. It’s a mistake to put all your economic eggs in one basket. The issue is not only about revenues for the cities, it is about jobs and quality of life for our residents. I think these concerns outweigh the profit motive of the real estate owners – who can rent their buildings in Beverly Hills for a handsome price even for nonmedical uses.
Some of the key issues regarding medical uses are:
• Medical uses generate very high traffic and parking demands.
Most medical buildings are older and do not meet parking demands, putting the burden on the streets, other businesses and public parking. In addition, these buildings tend to charge very high parking rates, pushing most of the employees and patients into parking intended for retail shops and restaurants. It also causes severe problems in residential neighborhoods adjacent to medical buildings as patients and employees use the streets for cheaper parking.
• These patients do not generate as much spinoff business as is suggested.
Most, but certainly not all, patients see their doctor when ill or having a medical procedure. After plastic surgery, patients usually have bandages and bruises. These medical patients tend to not go shopping or to restaurants because of their illness, procedure or appearance after their medical visits. Patients with any extensive surgery are not allowed to stay in hotels because hotels do not meet state standards for medical recovery. As a result, medical uses create large impacts and little revenue to offset those impacts.
• Many of the employees at medical offices are often not that highly paid and even many doctors make less today than what people perceive.
Most of the employees are not shopping at Louis Vuitton, eating at Spago or staying in five-star hotels. The employees from much higher-paying industries, such as entertainment, do shop, eat in restaurants and stay in hotels.
• Because of an old tax structure, medical uses in Beverly Hills, unlike the city of Los Angeles, pay very little in taxes, either from business licenses or sales taxes.
• Medical uses typically can afford to pay more in rents; understandably, property owners tend to prefer to rent to medical to get those higher rents.
This pushes out other office uses and exhausts office space. Other users, such as talent agencies and entertainment-based businesses, can’t expand; this situation has forced a number of businesses out of Beverly Hills. These businesses do generate clients and employees who shop, eat out and stay in hotels, and they produce very large tax revenues.
It is the entertainment business and the “rich and famous” nature of Beverly Hills that is the draw for tourism, events and movie productions. Tourism, events, movies and clients of entertainment businesses are the major source of revenue for the city.
• Much of the medical office use is not for plastic surgeons, but, in fact, for regular medical practices and the growing demand for space of doctors associated with Cedars-Sinai Medical Center.
These are patients with normal and often serious medical problems, not cosmetic needs. They visit primarily to be treated and hopefully cured, not to recreate.
• The city is not opposed to medical uses and already has a disproportionate amount of medical space in regards to its population and small geographic area.
With the growth at Cedars-Sinai and the demand it creates for medical office space, the entire city inventory of office space over time could be consumed by medical demands. The time to address this concern is now, not after it is a major problem.
I think you would agree that Beverly Hills’ reputation and thus its revenue sources are not built on being the medical support center for Cedars-Sinai. There is almost endless opportunity in the city of Los Angeles for this medical space to locate. I would also note West Hollywood is struggling with this same issue as a result of medical demands from Cedars-Sinai.
A city’s primary responsibility is to the long-term welfare of its citizens, not real estate interests.
Rod Wood was the city manager of Beverly Hills from January 2004 until last January. He is also a past president of the City Managers Department of the League of California Cities and past president of the California Chapter of the International City Managers Association. He is president of RJ Wood Associates Inc., which provides executive and economic consulting to local governments.
For reprint and licensing requests for this article, CLICK HERE.
Stories You May Also Be Interested In
- Beverly Hills Seeks Cure to Rash of New Medical Space
- Reviewing the Medical Reports
- To Your Health
- Cedars-Sinai to Deliver Primary Care Services to Santa Monica
- Cedars-Sinai Opens Urgent Care Clinic in West LA
- Cedars Makes Valley Moves
- Cedars to Anchor Playa Vista’s Runway
- Apple Launches Patient Health Records App in Los Angeles