The real estate slump, combined with tighter credit, means that fewer medical office buildings are being built. But after a previous construction boom, there is still more supply than demand.
10.1 million square feet of medical office space were scheduled for completion in 2009, a decline of 30% from 2008. Only 7 million square feet are expected to be built in 2010.
Rents went down in most areas of the country, because fewer practices are expanding into new space. Some practices are becoming smaller while others are closing.
Nationally, the per square foot costs declined from $24.90 in the third quarter of 2008 to $23.90 in the third quarter of 2009.
| Third quarter 2008 | Third quarter 2009 | |
|---|---|---|
| U.S. average | $24.90 | $23.90 |
| Midwest | $20.80 | $19.90 |
| Texas | $22.67 | $22.86 |
| Southeast | $23.87 | $23.20 |
| Southwest/Mountain | $24.33 | $23.68 |
| Northeast | $25.14 | $24.90 |
| California/Pacific Northwest | $30.63 | $29.45 |
Source: "2009 Real EstateInvestment Outlook," Marcus & Millichap's Medical Office Research Report, Oct. 12, 2009.
References:
Leasing market for medical offices hits downturn. AMA Medical News, Dec 2009.
References:
Leasing market for medical offices hits downturn. AMA Medical News, Dec 2009.
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