Phoenix Healthcare Elevated to Core Market

The Phoenix healthcare market is poised to see strong investment demand in 2019. Significant population growth in the metro has been the catalyst for significant medical office activity. Last year, medical office leasing activity was among the strongest in the nation with rental growth that far outpaced the national average. It’s no surprise that the dynamic and strong fundamental has attracted investment capital.

“In 2019, the investment market will be strong for healthcare assets,” Julie A. Johnson, principal and national co-leader of Healthcare Affinity Group at Avison Young, tells GlobeSt.com. “This sector has become a core real estate market and the Phoenix area bodes well for leasing as it continues to attract a growing population from both a jobs as well as retirement perspective as the cost of living is favorable, attracting a multi-generational demographic. As more medical office and hospital projects come online, we will see a temporary dip in multi-tenant medical office building occupancy as these new projects lease up. Capital continues to pursue build-to-suit and speculative projects but as construction costs are higher, lease rates will reflect that as well.”

Among the fastest growing niches in the healthcare umbrella is urgent care centers. Johnson says that both nationally and in the local Phoenix market, urgent care centers will be the a major trend in 2019, largely because it is a lower cost alternative to emergency rooms. In addition, there will be a focus on outpatient and ambulatory care services. “As emphasis on these types of services continues to evolve, we will see a change in how the space in hospitals is used as well,” she says. “For example, fewer inpatient beds will be required for the local population. Overall, the costs will go down for both hospitals and patients creating a better situation for everyone.”