The medical office sector in Michigan is in an interesting phase. Demand seems to be healthy, with supply being absorbed — however vacancy remains high, a report from Colliers shows, highlighting the asset class's performance for 2024.
Net absorption flipped to positive in the fourth quarter to 113,600 square feet, from -113.4 million in the previous three months and -31,400 from the same period in the previous year. That comes even as supply increased by more than five-fold to 366,200 from the September quarter. And while leasing volume remains a challenge, the fourth quarter absorption marked a "positive shift," according to Colliers.
Also, while vacancy remained elevated at 13.80 percent at the end of 2024 (compared with 12.50 percent) from the 12 months prior, rent has continued to grow. In the last three months of 2023, asking lease rents were at $18.92, which then increased to $19.15 and then $19.58 per square foot in the third and final quarter of 2024, respectively.
Recommended For You
"This trend suggests landlords remain confident in long-term demand, though elevated vacancies indicate ongoing challenges in absorption and tenant retention across the market," Colliers wrote.
The Grand Rapids submarket at the end of the year commanded the highest asking rents, at $19.67 per square foot at the end of the year.
"Grand Rapids continues to thrive with low vacancies and strong demand, while Lansing remains steady with high occupancy and modest leasing," Colliers said while adding that "new construction is concentrated in Grand Rapids, where significant projects are reshaping the landscape."
Total sales volume for 2024 was $39.5 million. The top purchase in the fourth quarter involved 12,232 square foot property 1650 Ramblewood Dr, for $2.9 million. That was followed by Mercury Hubbard Bldg and Heritage Medical Center, which traded for $2.2 million and $1.16 million respectively.
The top lease in terms of size involved a renewal for 18,699 square foot, 3300 Walker View NW.
Looking ahead, Colliers points to a few trends to look out for in the healthcare space. This includes growing demand for sector services in general with the population growing, the influence of artificial intelligence, and the mental health crisis leading to increased funding for facilities.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more inforrmation visit Asset & Logo Licensing.
Anthony Russo
Anthony Russo has been contributing to GlobeSt. since July 2024. Along with CRE, his financial background expands to capital markets, the economy, and consumer issues. Previously, he has written for CapitalWatch and was a senior reporter for The US Sun.
