REOC San Antonio
Commercial Real Estate Since 1974   
Kim_Gatley
Kim Gatley
S
enior Vice President & Director of Research at REOC San Antonio

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REOC San Antonio releases medical office market update

Source: REOC San Antonio

San Antonio’s medical office market showed encouraging signs of continued improvement in the third quarter.  On both a quarterly and over-the-year basis, vacancy decreased and average rental rates increased.  Citywide vacancy tightened to 18.2% – down from 19.0% last quarter and 19.6% recorded in the same quarter a year ago.  Disciplined medical office development activity has delivered well-located space without creating any major upheavals in occupancy levels.  At the same time, the average quoted rental rate for medical space throughout the city climbed to $23.49 per square foot per year on a full-service basis – up $0.12 from last quarter and $0.49 compared to last year at this time for a moderate annual growth rate of 2.1%.

With the coming implementation of the Affordable Health Care Act, demand for medical office space is expected to increase as health care becomes more available to previously uninsured Americans.  Even though health care reform is expected to ultimately result in greater demand and utilization of physician assistants and nurse practitioners, it is reasonable to expect that they will require nearly as much additional office space as a physician.  Looking beyond the traditional medical office buildings, health care providers are taking advantage of incentives in other commercial real estate properties.  Demand for health care-related space is spreading into retail shopping centers and other non-traditional medical office space as medical practitioners and other medical-related tenants position their services in convenient locations around town.

With limited medical product available to purchase, investment activity in the third quarter was limited to just a few small transactions.  Concord Health Management, for example, purchased Huebner Professional Center, Building 2 (6,057 sf) in the Northwest sector and Alameda Healthcare purchased 324 – 328 W. Houston Street (6,400 sf) in the downtown sector. Lenders have been very receptive and aggressive in making mortgage loans for physician-owned / occupied real estate but not for speculative development of same. Prime land sites for development of medical-related properties are quite limited.

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