Colliers International is reporting that after a slow first half of the year, conditions improved in the Greater Phoenix medical office market in the third quarter. Net absorption spiked in the third quarter, repeating a trend that emerged in the second half of last year. The surge in absorption has driven vacancy lower, and rents have begun to tick higher in recent months. With occupancies firming, landlords will ultimately begin to implement some modest increases, but this could take a few more quarters of improvement before a clear upward direction of market rents fully takes shape.
Investment trends are mixed, with activity picking up for traditional multi-tenant medical office buildings and slowing in condos. These trends will likely continue in the quarters ahead, as the consolidation that has been occurring in the healthcare industry should allow for greater activity at the high-end of price spectrum. With investors seeking buildings offering higher yields and tenants with sound financial profiles, medical office properties will likely remain a popular choice with institutional investors.
Key takeaways:
- Medical office vacancy in Greater Phoenix improved during the third quarter, falling to 16.7 percent. The most significant vacancy declines are being recorded in on-campus medical buildings.
- Asking rent trends have been mixed, but rents ticked higher during the third quarter. Rents continued to tick lower in large, off-campus buildings.
- Sales activity slowed during the third quarter, and activity levels have so far lagged the 2014 pace. Pricing trends have been mixed.
To read the full report Medical Office Report_3Q 2015-1