The driving force for increases in medical office space in the 2011 will be the increasing shift from in-patient to outpatient care.
Look for an increase in the demand for medical office space as hospitals and other healthcare providers continue their expansion into outpatient facilities. These outpatient centers are being developed both on on-campus and off-campus locations.
Mercy Hospital in Coconut Grove, which was recently purchased by HCA, is awaiting approval to enlarge its 673,000 square foot facility into a 1.2 million square foot state of the art complex. With the advancement of technology and new medical procedures, the hospital decided to increase their space for outpatient services.
Outpatient centers will be opening in places where there are rooftops, both in suburbs and urban areas. A new center is planned for Brickell Avenue and another project is in the planning stages near downtown Miami.
Despite uncertainties in healthcare reform and the sagging economy, some medical office projects in South Florida have done well. Another factor adding to their success is the growth in the baby boomer population. As a result of this growth, there is an increased demand for outpatient facilities ranging from physicians offices, urgent care centers, ambulatory surgical centers, diagnostic centers and specialty treatment centers. The healthcare industry remains one of the few growing segments of the economy.
There will be a growing trend toward hospital owned physician groups. Hospitals have been acquiring group practices. In some cases, hospitals are leaving the physicians in their current spaces, and in other cases hospitals are building or acquiring medical office buildings and relocating the newly hired doctor groups into those buildings. Family practice groups and internal medicine groups are better served being out in the community and not on-campus.
In our findings, the key factors in the medical office leasing market are the rental rates and the locations. This has been advantageous to healthcare providers who have been able to negotiate tremendous rental deals.
Landlords have been very aggressive and creative in this market. Some of the recent deals we have structured for physician groups, ambulatory surgical centers and diagnostic centers have been at below market rates.
Developers who are planning medical projects with unrealistic rental rates are having difficulties either leasing individual spaces or selling the entire project. Many developers overpaid for the land initially. Medical properties in heavily populated targeted suburbs and urban areas are prime locations for
projects.
The same holds true for existing projects. Completed offices, which include plumbing and cabinetry are leasing faster than unfinished spaces. Although the existing spaces might need updating or minor changes, the cost and time frame is less than a new space.
