GlobeSt.com: How is this demand affecting rental rates and availability?

Lewitt: Currently we are at 7% vacancy, which is an all-time low. Therefore, landlords have been very effective in raising rental rates for new tenants as well as renewals for their existing ones. Also, availability for contiguous medical space is very sparse in many submarkets. Landlords in these markets are able to receive a premium for blocks of space over 10,000 square feet.

GlobeSt.com: Which Southern California markets are seeing the most activity?

Lewitt: Submarkets with the highest barrier to entry and those where consolidation is most prevalent are seeing the most activity. Submarkets such as Beverly Hills, Santa Monica, Burbank and the west San Fernando Valley are affected by specific city prohibition against expansion of additional medical development. Others such as Torrance, Newport Beach, Riverside and Long Beach are seeing more demand from large medical users than the market can supply.

GlobeSt.com: Will federal discussions about changes to healthcare policy and the repeal of the ACA affect this market?

Lewitt: Most non-profit healthcare organizations that supply medical services to the poor and the elderly rely on the ACA. So far, the ACA has been left intact during the last congressional session, which has relieved the chill placed on much of the medical market. We are seeing many Federally Qualified Health Centers (FQHC's) and other providers that heavily rely on government reimbursement moving forward again with their real estate plans. However, this can change at any time in these precarious political times.

GlobeSt.com: Do you have any advice for tenants or investors in this niche that are looking for opportunities?

Lewitt: On the tenant side, rental rates and other concessions are more favorable for landlords, however, once this current economic cycle ends more healthcare properties will likely be supplied, which will assist tenants with their economics.

Medical office is becoming the new hot market in Southern California. According to new research from CBRE, Los Angeles, Orange County and San Diego medical office rents are up 9% since 2010 and vacancy rates are at a record low of 7%. Bryan Lewitt, SVP and the Southern California practice leaser for the healthcare services group at CBRE, says that the Southern California market is the last major market to experience healthcare consolidation, and it is driving increased demand and higher rental rates. To find out more, we sat down with Lewitt for an exclusive interview.

GlobeSt.com: What is driving this tremendous demand for medical office space?

Bryan Lewitt: Southern California is the last major market to be consolidated. As this process is underway, the bigger healthcare systems are competing with each other for large blocks of contiguous space, which has put pressure on our supply here.

GlobeSt.com: How is this demand affecting rental rates and availability?

Lewitt: Currently we are at 7% vacancy, which is an all-time low. Therefore, landlords have been very effective in raising rental rates for new tenants as well as renewals for their existing ones. Also, availability for contiguous medical space is very sparse in many submarkets. Landlords in these markets are able to receive a premium for blocks of space over 10,000 square feet.

GlobeSt.com: Which Southern California markets are seeing the most activity?

Lewitt: Submarkets with the highest barrier to entry and those where consolidation is most prevalent are seeing the most activity. Submarkets such as Beverly Hills, Santa Monica, Burbank and the west San Fernando Valley are affected by specific city prohibition against expansion of additional medical development. Others such as Torrance, Newport Beach, Riverside and Long Beach are seeing more demand from large medical users than the market can supply.

GlobeSt.com: Will federal discussions about changes to healthcare policy and the repeal of the ACA affect this market?

Lewitt: Most non-profit healthcare organizations that supply medical services to the poor and the elderly rely on the ACA. So far, the ACA has been left intact during the last congressional session, which has relieved the chill placed on much of the medical market. We are seeing many Federally Qualified Health Centers (FQHC's) and other providers that heavily rely on government reimbursement moving forward again with their real estate plans. However, this can change at any time in these precarious political times.

GlobeSt.com: Do you have any advice for tenants or investors in this niche that are looking for opportunities?

Lewitt: On the tenant side, rental rates and other concessions are more favorable for landlords, however, once this current economic cycle ends more healthcare properties will likely be supplied, which will assist tenants with their economics.