Healthcare: Medical real estate on a firm foundation

By Valentino Lucio for Express-News

Amid a struggling economy, San Antonio’s medical real estate market remains stable, generating new leases and better occupancy rates during the third quarter.

Although commercial real estate activity has stalled locally, various new medical-industry tenants have helped fill more than 54,000 square feet of space this quarter, according to a report by NAI REOC San Antonio.

Additions such as the University of Texas Health Science Center at the Christus Santa Rosa Professional Pavilion downtown and U.S. Renal Care at Westover Hills Medical Plaza II have lifted the year-to-date net absorption total to nearly 108,000 square feet.

With more than 5.8 million square feet of inventory available for the medical market in the Alamo City, the vacancy rate improved from 19.3 percent in the second quarter to 18.4 percent in the third quarter. But more than 90,000 square feet of medical office space was added in 2010, pushing up the vacancy rate from 17.9 percent during the same period last year.

“While the recession-resistant medical real estate market has remained a bright spot, even this specialty area has seen a slowdown,” said Kim Gatley, a senior vice president at NAI REOC San Antonio.

While a small degree of concessions still are available, rental rates during the third quarter jumped 29 cents to $22.60 per square foot compared to the second quarter. Rental rates also increased 3.8 percent from compared to the same period last year.

The health care and bioscience industry feeds about $16.3 billion into the local economy, the report states, and the traditional medical office market isn’t the only area getting a boost from the growing sector. To benefit from heightened exposure and customer traffic, companies are looking beyond the medical-only office market and are moving into retail spaces.

“We’ve seen an increasing trend of general practices and some subspecialties like dental and pediatrics moving to well-located, high-traffic retail sites,” said Carl Bohn, vice president of NAI REOC San Antonio.

Medical firms also are looking toward industrial properties as an alternative. InCube Lab’s new medical laboratory on the Northwest Side alone will fill nearly 21,000 square feet of space and employ about 50 people, the report states.

Even though the economy has sputtered, the medical market is expected to grow with several new construction projects expected to start or come online next year.


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