929 W. Higgins Rd. in Schaumburg, IL, was one of four medical properties just sold by Oak Brook, IL-based IPC.

CHICAGO—Once considered something of an afterthought by institutional investors, medical office has rapidly established itself as one of the most desirable sectors. And with so many favorable trends, including the aging of the US population and the desire among patients to see medical professionals in new facilities close to home, experts say new construction should continue proceeding at a healthy clip. For most kinds of commercial real estate, a rapid expansion is usually taken as a sign that a more cautious approach may be needed, at least from an investment standpoint. But medical office will probably escape that trap.

“There has been an ever-so modest uptick in vacancy in the last year,” Alan L. Pontius, senior vice president and national director specialty divisions at Marcus & Millichap, tells GlobeSt.com. However, “we had been operating a ten-year low.”

According to a new research report from M&M on the medical office sector, by mid-year the overall rate hit 8.2%, a 10 bp increase since mid-2017. Nearly every major region saw an increase in vacancy, with the exception of the Mountain region, where vacancy plummeted 60 bps year-over-year to 11.1%. “That's hardly the picture of a softening market,” Pontius says.