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Investors Target Medical Office In Defensive Play

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Demand for medical office space has mostly normalized, with investors pouring capital into the asset class in what some experts are calling a defensive strategy.

“While some people continue to practice caution amid the emergence of new COVID-19 variants, ultimately many of these appointments must be fulfilled,” Marcus & Millichap’s Alan Pontius writes in a new report. “All the while, the population is aging, which brings along certain medical realities. These factors together underpin the current strong tenant demand for medical offices.”

While traditional offices saw a major rise in vacancy at the onset of the pandemic, medical office vacancy rose just 80 basis points to 9.5% in 2020.  Availability tightened at the tail end of 2020, which drove the average asking rental rate up to $22 per square foot, an increase of nearly 4% from the end of 2019.  Asking rents were highest in San Francisco, followed by New York City, Los Angeles, San Jose, Miami-Dade, Oakland, San Diego, Orange County, Seattle-Tacoma, and Washington, D.C. Meanwhile, vacancy was lowest in 2021 in San Jose, Portland, Louisville, Seattle-Tacoma, and Salt Lake City.

Supply additions expected this year are on par with 2020 figures, with an estimated 9 million square feet of space projected to open this year. Marcus & Millichap predicts that vacancy will decrease to 9.2%, down 20 basis points and 40 basis points above pre-COVID levels.  Meanwhile, the firm predicts rent growth in the neighborhood of 2.5% to an average of $22.61 per square foot, with six markets predicted to hit levels above $30 per square foot led by the Bay Area, New York, Miami-Dad, and Los Angeles.

Staffing shortages remain a headwind for the sector in the short term, as the health crisis continues to hit healthcare worker payrolls. Stated simply, healthcare workers are burned out, and “medical practices are aware of this dilemma,” according to Marcus & Millichap, adding that 73% of those surveyed in a recent national poll ranked staffing as their largest pandemic-related challenge at the start of this year.

“The inability to onboard staff may keep medical practices from expanding this year, combating what are otherwise strong demand tailwinds,” Pontius says.

 

Source: GlobeSt.

Why Should You HIre Professional Medical Office Brokers?

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The medical field is expanding every day, and medical professionals, doctors, or dentists do a great job by providing their services to the community.

To appreciate their efforts for the better well-being of all humans, professionals also need the best facilities to make others’ lives better. Having the best office in the most suitable place is a necessity for every medical professional nowadays.

A medical staff’s paramount issue is finding the location in the area that helps generate maximum revenue. In addition to earning profits, a medical practitioner desires a calm and peaceful environment to make the best of all matters. Medical office brokers can help you find the best place for creating a successful start-up and help make a practice successful.

Provide More Stability to Your Business

Different components combine to assist any medical practitioner in performing well in their office. Especially when a medical practice is starting from scratch, expert advice and background knowledge of the locality puts a medical professional in a solid position to deal with things. The medical office broker can offer guidance to attain stability quickly to help earn more profits.

Experienced In Negotiating With The Concerned Party On Your Behalf

Purchasing a property for a novice doctor is undoubtedly a daunting task. This is where property brokers become saviors to release tension by taking the property burden on their shoulders. They are experienced enough to understand the needs in a respective area.

They will help in managing resources and get the space as per a medical practitioner’s requirements. They will talk to the investors and find an appropriate party as well. So, whether looking for a commercial place or a home office, they will act as business partners to facilitate along the way.

Have A Smooth And Hassle-Free Property Experience  

Medical office brokers are responsible for taking over the charge of the whole process of transferring the land. They will be there to assist with the required knowledge of the rental space. Since these people are well cognized and know all property rules, they can be depended on to start a medical practice immediately.

Moreover, they will also allow a practice to save money on wrong investment decisions. With their experienced professionals, a practice is handled by trained professionals to guarantee success.

Overall Benefit

It is better to consult some trustworthy brokerage professionals or firms before buying or selling the space for a medical practice. Many firms provide free consultancy and inform the right time for selling a property. With reliable people, a medical practitioner can make the right buying decisions.

Since the property renting process can become longer and involves many twists and turns, a medical practicioner needs knowledge to handle ssues. Real estate dealers or brokers can ensure peace of mind.

 

Source: South Florida Caribbean News

Dallas Is Nation’s Second Most Active Medical Office Building Construction Market

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Dallas-Fort Worth has the second-most medical office building construction nationwide, accounting for nearly 1.5 million square feet and behind only New York City.

Medical office buildings are getting larger, farther away from hospital campuses, and remain profitable and well-occupied in the region, according to Revista data shared by Mike Hargrave at the North Texas Hospital, Outpatient Facilities, and Medical Office Buildings Summit. Private equity is an growing influence in health care transactions, and Dallas leads major Texas markets in average rent and rent growth for medical office buildings as well.

Dallas has 14 projects under construction in the medical office building space valued at $503 million and is second only to New York’s more than 2 million square feet worth over $1.3 billion. Houston is a close third, with 15 projects accounting for 1.2 million square feet and $344 million.

Since the 1980s, medical office buildings have moved from around 1.5 miles from the nearest hospital to often nearing three miles today. Building peaked around 2009 with nearly 35 million square feet built that year to around 21 million this year.

Meanwhile, individual projects are getting bigger. Most projects were less than 40,000 square feet prior to 2005, but since 2009, the average square foot for medical office building are closer to 60,000 square feet.

Healthcare practices are growing as well. Between 1981 and 2007, most practices were less than 8,000 square feet, but today the median size is 12,000 square feet.

Occupancy of investor owned outpatient buildings has remained fairly consistent since 2009, hovering between 90 and 92 percent. Relative to Austin, San Antonio, and Houston, Dallas has nearly as much as Houston in terms of inventory with 34.2 million square feet, but is on top of the heap in occupancy at 89.8 percent. Its $22.53 per square foot is also tops in Texas, as well as its year over year rent growth at 2.9 percent.

Nationwide for the last four years, healthcare real estate transactions remain strong, hovering between $15 and $20 billion for combined hospital and medical office building deals. Private equity’s influence on those deals is growing, as 2014 saw 27 percent of transactions grow to 61 percent by 2018. REIT has seen a sharp decline, from 53 percent of deals in 2014 to just 16 percent last year.

Across the US, there are 439 medical office buildings and 491 general hospitals under construction, accounting for 108.3 million square feet and $67.2 billion. The median size of a medical office building is 50,000 square feet and median value is $17 million. Median hospital size is 95,5000 square feet worth $50 million.

 

Source: D CEO Healthcare