The medical office market in Columbia, South Carolina, remained stable during the last six months of 2009 as medical practices adjusted to the impact of the national recession and anticipated changes resulting from the proposed healthcare legislation. Negative absorption of 10,668 square feet resulted in a slight decline in market occupancy from 87.29% at mid-year 2009 to 86.68% at year-end 2009. However, there was a distinctive shift in occupied space from on-campus and hospital-owned medical office buildings (MOB) to off-campus multi-tenant properties. As in all sectors of the economy, medical practices began to focus on the reduction of operating expenses, and some relocated to lesser expensive off-campus space.
Decreased demand in MOB space caused a decline in asking rental rates, from $22.67 per square foot at mid-year 2009 to $22.19 per square foot at year-end 2009. Although MOB rates declined, the addition of 52,307 square feet of this higher priced space to the market resulted in an increase in the average asking rental rates across the market.
Construction activity in the medical market declined during 2009 as it did in all real estate sectors, however, the reasoning for the decline may be different. Wherein a lack of available financing and increased capital requirements accompanied most real estate development projects in 2009, affordable loans and attractive construction costs were still available for owner occupied practices. Although rates remained attractive, this was not enough of a positive influence to enhance new medical construction. The lack of construction may instead be attributed to the concerns about the future of healthcare delivery as well as some medical practices feeling the impact of a weak economy.
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