The Phoenix medical office market has been a bright spot through the pandemic. The market has been one of the most active and sought-after in the country, and the momentum hasn't slowed in the last year. In one of the most recent transactions, Cushman & Wakefield brokered the sale of a freestanding class-A medical office building in Chandler for $6.5 million. The property is an example of the market activity.

"Phoenix has long been viewed as a strong medical office market due to its consistent population growth which fuels medical office demand; however, the COVID-19 pandemic has offered a unique glimpse into the resiliency of medical office tenants," Sheila Bale, a managing director at Cushman & Wakefield, tells GlobeSt.com. "Despite several weeks of forced closures to clinics, ambulatory surgery centers, imaging centers and other outpatient treatment facilities early on in the pandemic between mid March through early May 2020, and despite the fear many patients had of simply going outside of their own homes during that delicate time, medical office landlords in Phoenix still collected nearly 100% of the rent owed by tenants and buildings remained full."

In addition to strong cash flow, medical office leasing activity and attrition has also been stable through the pandemic. "In sharp contrast to the traditional office market, medical office vacancies remained low with few tenants giving back space or placing space on the market for sublease," says Bale. "Low vacancy combined with increases in construction costs have set the stage for rent growth which is starting to be seen in markets like Phoenix. Not surprisingly, investors have taken note of all this and yield expectations have compressed as a result." Nashville-based Montecito Medical Real Estate purchased the Chandler property.