Healthcare: Health care issue kept high-end medical office sales on hold
by Mark Alexander for News-Press
The only difference between medical office values from sales closed in 2008 versus sales closed in 2009 through 2010 year to date is that the high end has almost disappeared since the start of 2009 because owner/occupants had mostly sat on the sidelines waiting for the health care reform debate to finish.
During this time we saw increased sales of low and medium value medical buildings sold mostly by investors, where the buildings sold either vacant or with various degrees of vacancy/deferred maintenance coupled with leases on short (less than three years) remaining terms.
- 2008 medical office sales: There were 16 medical office sales closed in 2008 in Lee County of which nine sold above $200 per square foot (high value), five sold between $100 and $200 per square foot (medium value) and two sold below $100 per square foot (low value).
These 16 medical office sales in 2008 gave us an average sale price of $203 per square foot because the high and medium value medical sales dominated the year with 14 out of the 16 total medical sales made that year.
- 2009-10 year-to-date medical office sales: There were 18 recorded medical office sales over the past 18 months in Lee County. Only two of these sales were above $200 per square foot (high value) but eight of these sales were between $100 and $200 per square foot (medium value) and eight closed below $100 per square foot (low value).
Since the low and medium value medical office sales dominated the field with 16 out of the 18 total sales closed during the past year and a half, the average price of these 18 closings came down from $203 per square foot in 2008 to $121 per square foot at present.
The high value owner/occupied medical sale/leasebacks were absent during the last 18 months, causing a skewed lower average price for sales over this period. But that is due to change.
- High end due back: Now that health care reform legislation has been enacted, the level of insured medical patients is predicted to rise measurably over the next few years. This is naturally expected to increase patient volume, which is one of the reasons the high growth medical field is so highly sought after by investors looking to purchase long-term net leased medical buildings.
As owner/occupants of medical buildings start bringing their properties back to the market via sale/leaseback transactions, the high value segment (i.e. over $200 per square foot) of medical office sales will once again play a significant part in our commercial real estate landscape.
