Medical job increase of 3.7 percent during 2019 fuels medical real estate market

3rd quarter medical office net absorption rebounds into positive territory

Phoenix, October 31, 2019 – Colliers International reports the Greater Phoenix medical office space market performed well during third quarter 2019, rebounding from a challenging performance during second quarter.  Medical job growth hit 3.7 percent during the first three quarters of 2019, outpacing the 2.7 percent overall employment increase.

Net absorption of medical office space reached nearly 100,000 square feet during third quarter, outperforming the negative (152,827) square feet of net absorption posted in second quarter.

Developers have completed 211,582 square feet of new medical office space this year. More than $1 billion of bioscience related projects are currently under construction, with more than $2 billion set to launch of the next couple of years. These projects are expected to create nearly 7,000 new jobs once completed.

Projects to watch include ASU/Wexford’s 227,000-square-foot medical lab/office space in Downtown Phoenix, Creighton University’s Medical School at Park Central and Mayo Clinic’s $600 million North Phoenix campus expansion.

Despite deliveries of new space, vacancy of medical office space fell approximately 30 basis points to 13.6 percent. Third quarter marked the eighth consecutive quarter of medical office space vacancies below 15 percent. The lowest vacancies are found in the Downtown North (2.7 percent) and I-10 West (4.0 percent) submarkets.

Vacancy is expected to slightly rise during the last months of 2019, as more developments come online. However, increased absorption rates could counterbalance that new inventory addition.

Asking rental rates rose slightly during the third quarter with a 0.2 percent increase. Thus far in 2019, asking rental rates have risen 3.1 percent to $21.16 per square foot. The West I-10 submarket posted the largest increase over the year, elevating 20.3 percent to $23.06 per square foot. Second was South Tempe/Ahwatukee where rates increased 13.6 percent to $17.69 per square foot. Rental increases are expected to rise throughout the rest of the year at a moderate pace.

Year-to-date Greater Phoenix has posted its highest medical office investment sales volume since 2015. Thus far, volume has reached $238 million across 41 transactions. The median sales price has been $158 per square foot, with cap rates settling at 8 percent.
During third quarter, sales volume rose 52 percent from second quarter levels to $111.6 million within 18 transactions. The median sales price during third quarter was $247 per square foot and cap rates were at 7 percent.

The primary drivers of medical office space demand remain firm. Robust population and job growth are propelling the market in near-to-medium term. 

About Colliers International
Colliers International (NASDAQ, TSX: CIGI) is a leading global real estate services and investment management company. With operations in 68 countries, our 14,000 enterprising people work collaboratively to provide expert advice and services to maximize the value of property for real estate occupiers, owners and investors. For more than 20 years, our experienced leadership team, owning more than 40% of our equity, have delivered industry-leading investment returns for shareholders. In 2018, corporate revenues were $2.8 billion ($3.3 billion including affiliates), with more than $26 billion of assets under management.

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Colliers International in Arizona has served clients locally and globally for more than 35 years.

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Thomas Brophy

Research Director


As national director of multifamily research & analytics for the Cooke Multifamily Team with Colliers International, I am responsible for the aggregation, management and analysis of all market, and related, data sets.

I am committed to providing market-leading research services through the systematic deployment of custom, purpose-built software and analytic platforms for the creation of qualitative, not just quantitative, analysis.

In addition to publishing quarterly statistical reports for each market in which our clients operate, I maintain a database of both publicly available, and in-house built, leading economic/real estate indicators to provide forecasts and analyze and interpret real estate trends as they happen.

I also produce customized research reports on behalf of the team and clients, prepare market presentations and develop ad hoc research projects in support of business development.

My ethos: question different; for it is in asking better, more salient, questions that true market knowledge, and understanding is found. I am reminded of the words of T.S. Eliot who stated, “Where is the wisdom we have lost in knowledge? Where is the knowledge we have lost in information?”

In our new era of big data, we have reached peak data overload. Knowledge is a derivative of information; wisdom, knowledge’s ultimate abstract, can only be gained when tethered to, and guided by, past experience.

Data without context is like a light without a bulb, a market without a narrative or an explanation without a common reference point.

Data is but a guide to asking better questions; better questions lead to greater understanding, which, if deployed effectively and purposely, lead to better results.

Prior to my current role, I served as research director for Colliers International in Arizona, managing the research department entrusted with all market data and analysis activities. My creative outlook significantly enhanced research services for clients and brokers. Collaborating with other service lines and professionals, our research team provided extensive data compilation, including ownership, zoning, land use, property sales and demographics, and developed reliable statistical information.

My extensive experience includes collecting, analyzing and preparing market and economic data and research, as well as expertise in corporate communications, investor relations, strategic planning, brand management and public speaking.

Prior to Colliers, I was director of research for ABI Multifamily, where I developed market reports and research data used in marketing materials for ABI offices in Phoenix, Tucson, Sacramento and San Diego. I oversaw all data collection and reporting, wrote monthly market insight articles, and developed market podcasts.

As director of research and partner for Neighborhood Ventures (a multifamily investment firm), I collected, analyzed and wrote market data reports for use in investor presentations, offering materials and corporate communications. As principal with EPU Investments, I directed business and research operations for a multi-divisional investment company involved in single- and multifamily development and land services, including farming and water rights assessments and acquisitions.

Serving as an affordable housing specialist at Hendricks & Partners (now Berkadia), I provided assistance, research and guidance in creating the affordable housing division, and assisted brokers and clients in the acquisition and disposition of assets across the U.S.

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