Q2 2020 Medical Office Market
- The medical office market added 244,956 SF of inventory in the second quarter with a vacancy of only 18% within these projects
- Q2 saw largest new supply of medical office space since Q3 2017, when 411,926 SF were delivered
- Net absorption was 192,001 SF in second quarter
- This marked the second consecutive quarter of positive net absorption and highest since Q4 2018
- Vacancy settled at 13.8%, 20 bps higher year-over-year, but decreased 50 bps over-the-quarter
- Rental rents managed to increase 0.7 percent over-the-quarter, and 4.3 percent year-over-year, settling at $21.58 PSF
- Investment sales volume decreased 82% over-the-quarter and 89% over-the-year
- Median price per square foot declined for the second consecutive quarter to $106 PSF
- Cap rates remain low and below 8%
Outlook: The medical office forecast remains extremely positive for the tail end of 2020. Healthcare is expected to be one of the quickest industries to bounce back from the pandemic. Leasing and investment sales activity took an uncontrolled slowdown in the second quarter.
There is a conglomerate of paused deals waiting to be completed. More demonstrated confidence will be required to finish the transactions. Investors are still in the market looking to secure deals, but the due diligence phase has significantly increased because both the lenders and investors require a high percentage of certainty to move forward.
In the midst of the COVID-19 outbreak, information and data is emerging at a quick and uneven rate. The information contained herein has been obtained from sources deemed reliable at the time the report was written. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.