The commercial office condominium market shows signs of weakening, but that doesn’t mean there aren’t areas that are still strong. You have to find the right location. And Kenneth Weston knows where to look.
As founder of Kenneth Weston & Associates, Inc., Weston has been active in health care real estate for 30 years, ever since having been involved in one of the first medical condos in the Eastern United States in 1978. For that reason, he has the expertise on the subject, and his conclusion is that the overall office condo market “is not as hot as it used to be. But the medical office condo market in South Florida still remains strongbut only in certain areas.”
Weston said the industry was booming for several years, which induced developers to try to get on board. However, as he explained, “Some developers who are not totally familiar with the medical office market and who lack local expertise are now trying to take advantage of this opportunity. Unfortunately, if one is not familiar with the trends in the health care industry, it results in some people just putting projects on the market that aren’t properly researched. By that, I mean that before any property goes on the market, there should be a target market for the users. That hasn’t always been the case, so there’s been an over-supply and there wasn’t enough demand to meet it.”
He said that his company tries to look at the big picture before starting a project. “We look at the market from a macro point of view and determine ahead of time what physicians and health care users fit that particular market. The reason is that one building typically cannot serve the needs of all types of users.”
For example, Weston said you have to make sure the target market can afford the building. “You can have the best location,” he said, “but if the price of the building is too high for the type of physician or health-care user you’re trying to market it to, it doesn’t work. Then the project’s not going to be successful.”
Weston added, “Ultimately, those are the people who come back to us and try to get us to help them convert a lemon into lemonade. Because there are a whole lot of situations regarding medical condos, such as parking, the design of the building, the bay depths, etc., and they all have to be taken into consideration. We finished seven medical office condos in the past 2-1/2 years. Most all of them have sold out, but each particular project was geared for a particular end-user.
“Traditionally, the medical office condo market has the type of users who from the very beginning were geared for this type of arrangement: (1) They don’t need as much flexibility because they don’t upsize and downsize a lot; (2) Since the cost of plumbing and cabinetry is very expensive, they can’t afford to move very often because it costs too much money to build out new office space; and (3) Once they’re located in a certain place, they very rarely move.”
In fact, Weston added that a mistake some physicians sometimes make is relocating to a new area away from their existing office location because of lower prices on the property. “That’s the worst thing a doctor can do, because it could result in possibly losing their patient base.”
In summarizing, Weston said, “My company was involved in one of the first medical condos in the Eastern United States. We’ve been doing this through all different trends, fluctuations in interest rates, and supply and demand. But physicians still have to have a place to practice. In the next 15 years you will see some 77 million people hitting the age of 60, so the overall prospects of medical office space now and in the future will remain strong.”
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