Medical office has been one of the best performing asset classes through the recent market dislocation caused by the pandemic. In Southern California, the strong fundamentals have attracted investors, and at the end of the year, both Los Angeles and Orange County saw significant medical office deals close.

In Los Angeles, 4343 Lankershim in North Hollywood and 150 N. Robertson in Beverly Hills traded hands in the fourth quarter at record low cap rates for medical office in the LA region, according to data from JLL. Investment activity was strong throughout the year. Other major deals include LaSalle Investment Management's purchase of a 49,721-square-foot, class A medical office building in Beverly Hills, CA for $74.4 million from UBS Realty Investors, and Meridian's acquisition of the Beverly Hills Medical Plaza, a three-story, 67,510-square-foot class-A medical office with 88% occupancy, for $81.5 million in partnership with an unnamed institutional investor. In Orange County, trophy asset Newport Lido Medical Center in Newport Beach sold in what was one of the largest medical office deals in the history of the sector.

It isn't surprising that investment capital is bullish on the medical office space. Both counties have strong fundamentals. In Los Angeles, the vacancy rate fell below 10% for the first time since the start of the pandemic, and in Orange County vacancy is below 9%. The limited availability has put upward pressure on rental rates, most significantly in Orange County, where rates have reached $3.11 per square foot, up $.11 since the beginning of the year, although rents have yet to surpass the 2020 high of $3.20 per foot. In Los Angeles, rents have remained high at $3.50 per square foot, above the pre-pandemic rates. However, landlords are offering increased concessions, although the JLL experts expect concessions to wane this year.