"There will be a significant increase in both short- and long-term demand for medical offices and outpatient facilities," declares a new report from BremnerDuke Healthcare Real Estate, the healthcare facilities development arm of publicly held Duke Realty Corp. Deeni Taylor, executive vice president of BremnerDuke, notes that during the past two years, BremnerDuke medical office properties have performed favorably, with occupancy remaining near 90%. Taylor notes that, during the past year, Duke Realty has raised more than $1.5 billion in capital, "which will enable us to efficiently take advantage of these opportunities," Taylor says.

A report by Marcus & Millichap points out that, even with the turmoil in the economy, only 1% of MOBs are now distressed, equating to just $200 million in troubled loans, compared with almost $20 billion for the 3% of traditional office assets now at risk. Nonetheless, Marcus & Millichap points out, the MOB segment remains under pressure. "Recessionary stresses and rising medical costs have kept aportion of the US population on the sidelines for elective outpatient care, easing demand for physicians' services and,in turn, medical space," the report states. As a result, deliveries of new medical space have recently outpaced absorption and vacancy has ticked up, forcing operators to lower rents in an effort to keep occupancy levels in check, according to the Marcus & Millichap report.

The national debate about healthcare reform "is especially relevant to the MOB market, as any measures passed by Congress could further bolster the sector," Marcus & Millichap points out. It cites estimates that if 50% of the 46 million people who are now uninsured gained coverage, the added demand would require nearly 45 million square feet of MOB space beyond what is needed to satisfy normal demand trends. BremnerDuke notes that some projections call for adding as much as to 61.9 million square feet of additional MOB space, based on the current ratio of 1.9 square feet per insured person.