It’s official: countywide medical office vacancy has fallen below the 10% benchmark. Rental rates are now steadily rising. The market is showing consistent signs of improvement, with some properties achieving record sale prices and rental rates. Investment properties have recently traded for as much as $729/SF. Unique owner-user properties have reached upwards of $500-600/SF. And the new high watermark for Class A medical office rent is $4.00 NNN. Comps in this range are limited to very specific properties and submarkets, the point being that acquisition and occupancy costs are breaking new barriers. The wiser investors, developers and occupiers of healthcare real estate are strategizing and planning accordingly.
As the evolving healthcare environment becomes more competitive, providers are placing a higher value on visibility, space functionality and aesthetics. A growing number of physician groups are forging new partnerships and strategic relationships, allowing them to gain economies of scale with payors, streamline staffing needs and add new services and technology. Additionally, these new relationships often allow practices to consolidate into larger and more efficient space with reduced overhead per provider while improving the patient experience through a more appealing environment for care.
As a result, medical tenants continue to vacate …
To request a complete version of the Q4 2014 San Diego Medical Office Report, please contact Paul Braun, Chris Ross or Kelly Moriarty.
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