"There will be a significant increase in both short- andlong-term demand for medical offices and outpatient facilities,"declares a new report from BremnerDuke Healthcare Real Estate, thehealthcare facilities development arm of publicly held Duke RealtyCorp. Deeni Taylor, executive vice president of BremnerDuke, notesthat during the past two years, BremnerDuke medical officeproperties have performed favorably, with occupancy remaining near90%. Taylor notes that, during the past year, Duke Realty hasraised more than $1.5 billion in capital, "which will enable us toefficiently take advantage of these opportunities," Taylorsays.

A report by Marcus & Millichap points out that, even withthe turmoil in the economy, only 1% of MOBs are now distressed,equating to just $200 million in troubled loans, compared withalmost $20 billion for the 3% of traditional office assets now atrisk. Nonetheless, Marcus & Millichap points out, the MOBsegment remains under pressure. "Recessionary stresses and risingmedical costs have kept aportion of the US population on thesidelines for elective outpatient care, easing demand forphysicians' services and,in turn, medical space," the reportstates. As a result, deliveries of new medical space have recentlyoutpaced absorption and vacancy has ticked up, forcing operators tolower rents in an effort to keep occupancy levels in check,according to the Marcus & Millichap report.

The national debate about healthcare reform "is especiallyrelevant to the MOB market, as any measures passed by Congresscould further bolster the sector," Marcus & Millichap pointsout. It cites estimates that if 50% of the 46 million people whoare now uninsured gained coverage, the added demand would requirenearly 45 million square feet of MOB space beyond what is needed tosatisfy normal demand trends. BremnerDuke notes that someprojections call for adding as much as to 61.9 million square feetof additional MOB space, based on the current ratio of 1.9 squarefeet per insured person.