Q3 2020 Medical Office Market
The medical office market added 106,000 square feet of inventory in the third quarter, with high vacancy of 47% within three projects, focused primarily in the Glendale and Deer Valley submarkets.
- Net absorption remained positive, ending at 87,913 square feet, marking the third consecutive quarter of positive net absorption
- Vacancy settled at 13.7%, 100 bps higher year-over-year and 30 bps higher over-the-quarter
- An increase in available sublease space was witnessed throughout metro Phoenix, increasing 17% since the previous quarter and 164% year-over-year. However, the total amount of sublease space remains less than 1.3% of the entire MOB inventory
- Central Scottsdale took the largest hit, increasing 215% over-the-quarter and making sublease space 4.7% of the entire submarket’s inventory
- Investment sales volume drastically increased 250% over-the-quarter but decreased 15% over-the-year to $40 million
- The median price per square foot increased 52% over-the-quarter to the current $160. This increase was heavily driven by the $27 million sale of Scottsdale Gateway I, a 107,049-square-foot building in central Scottsdale that is home to Honor Health, Matrix Medical and SimonMed
- Rental rates managed to increase 1.4% over-the-quarter and 3.8% year-over-year, settling at $21.90 per square foot
As we begin to see the workforce strongly push for a return to the office, this will improve trust and momentum in activity. Investor sales will continue moving forward, encouraging a strong recovery as the demand to be in the Phoenix market continues to gain strength.
According to a local generic drug manufacturer, Phoenix is in a prime position with plenty of opportunity to attract Life Sciences companies. These companies are primarily located in the high tax areas of California and New Jersey and may be looking to improve their business environment.
The upcoming election has placed Phoenix in the spotlight and positioned us as the nation’s top market for political advertising spending. At a local level, there are state propositions that could impact our economy and image as a pro-business city.
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.