Rutson: “You’re going to see
new development and more
movement into retail because
of the parking and visibility
that is the driving force of the
off-campus trend.”

(Save the date: RealShare Medical Office Buildings comes to the Four Seasons in Scottsdale, AZ, November 7 -8 )

CALABASAS, CA-A move to fill recession-emptied retail space and a proliferation of in-store clinics will continue and could accelerate if a major retailer enters the game and more vacant retail properties are repositioned for medical use, according to Marcus & Millichap’s latest Medical Office Research Report. The report points to overall strong medical-office building performance, although specific asset performance diverges by age and quality.

In addition, since healthcare is a highly regulated industry with many different players, the implementation of Accountable Care Organizations and the return on investment will be “a very challenging process over the next few years,” according to David Rutson, founding principal of Globe Medical Realty Advisors in Grapevine, TX, who will be moderating a panel on the business of medicine at RealShare Medical Office Buildings  in Scottsdale, AZ, next month.

The M&M report also indicates that while demand for medical office space will receive a boost from increased healthcare demand, pressure on tenants’ revenues will hamper the pace of rent growth. 

New supply in 2012 will exceed last year’s total by a wide margin, but will pale in comparison to 2007-2009, when medical-office inventory grew by nearly 60 million square feet.

Vacancy among buildings constructed prior to 2007 softened modestly over the past year, but, at 10%, remained below the overall average. Vacancy rates in second-quarter 2011 and second-quarter 2012 were lowest in the Pacific Northwest and highest in the Mountain region.

Demand for non-institutional grade, but still high-quality, assets has intensified thanks to a growing pool of private investors and non-traded REITs circling the market for deals.

*Charts provided by Marcus & Millichap Research Services, CoStar Group, Inc. and RCA

For the complete Marcus & Millichap report, click here.