MEDICAL OFFICE TRENDS AND 2014 OUTLOOK: KEY TAKEAWAYS
- Drivers of health care demand: In the short term, an additional 32 million people insured by the Affordable Care Act (ACA); long term, more than 20% of the U.S. population will be 65 or older by 2029.
- ACA regulations mean more consolidation among health care providers and insurers, further tilting medical office demand to large companies.
- Medical office accounts for 25% of all U.S. office space under construction. Construction has decreased significantly since the recession: 1.8 MSF in 1H 2013 vs. 8.4 MSF in 1H 2009 (markets tracked by Colliers).
- Decrease in construction is attributable to conversion of non-traditional properties, especially big box retail and suburban shopping centers, and uncertainty regarding impact of ACA on health care delivery mechanisms.
- Investment: $2.47B of medical office transactions in Q4 2013 was highest since Q4 2006, exceeding even the Q4 2012 surge prior to 2013 tax increases. 2014 should be a strong year, given scarcity of properties, availability of capital, and opportunities in secondary/tertiary markets.