PHOENIX—It's good news for the Phoenix medical office market as momentum was gained in the fourth quarter, with net absorption reaching nearly 100,000 square feet. The year totaled more than 120,000 square feet net absorption and marked the fourth consecutive year of positive net absorption in the local medical office market, according to a Colliers International fourth quarter report.
While vacancy is still elevated, it is slowly improving and nearing a five-year low. The healthcare segment of the economy continues to respond to changing conditions associated with the Affordable Care Act. But demand is expected to grow based on population growth and expansion of healthcare employment.
Healthcare employment continues to expand rapidly. During the fourth quarter, 4,800 healthcare jobs were created, making the total for the year 9,300 new workers in the field—accounting for more than 20% of all employment growth in the Valley in 2013.
Hiring gains in the healthcare segment were reflected by productivity in the medical office market. Medical office vacancy fell 60 basis points to 19.3% in the fourth quarter. For the year, vacancy rose in on-campus buildings and fell in off-campus facilities.
"Of all the sectors, the medical office market is one that has undergone the greatest changes in recent years due to the upheaval in the economy and the uncertainty that surrounded the Affordable Care Act. Despite this volatility, recent activity suggests the market is poised for an upswing, with net absorption rising and building sales climbing to levels we haven't seen in years. Certain submarkets are benefiting from the heightened activity. The Southeast Valley experienced about half of the medical office condo sales while the median price in the Northwest Valley increased by 20 percent," Bob Mulhern, managing director of Colliers International in Greater Phoenix tells GlobeSt.com. "We are optimistic that the medical office market will continue to improve particularly as the local population grows and health care employment continues to expand."
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