The Doctors Are In: Medical Office Vacancy Hits 15-Year Low

ATLANTA, GA—Rising demand for Atlanta’s medical office space resulted in the decrease in market vacancy to nine percent in first quarter 2018, its lowest level since 2003. According to research by Transwestern, absorption posted at 372,377 square feet, nearly twice the space absorbed in fourth quarter 2017 and more than half of 2017’s total.

“Healthcare continues to be a growth engine for Atlanta’s economy,” says Steve Hall, Transwestern senior vice president. “Due to low vacancy and limited construction, medical office demand at hospital campuses is significantly outpacing supply. Increased leasing activity has pushed rents up by three percent year over year, and we foresee heightened investor interest in the market as a result.”

First quarter 2018 demand was strongest in the North Fulton and Northwest submarkets, where there is little to no new medical office construction, followed by South Atlanta. At the close of the quarter, 548,291 square feet was under construction throughout Atlanta, most of which is in submarkets with a very low vacancy rate. About two-thirds of the developing space is already leased. Medical office asking rates now average $23.10 per square foot, and the average sale price is at $374 per square foot.

“As Atlanta’s population and economy continues to outperform the nation, we expect high demand in Atlanta’s tight medical office market to further the trend of rent growth and a downward-ticking vacancy rate over the next 24 months,” says Keith Pierce, Transwestern director of research for the Southeast US.