REOC San Antonio
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Kim Gatley
enior Vice President & Director of Research at REOC San Antonio

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REOC San Antonio releases 4Q 2012 medical market update

Source: REOC San Antonio

With the future of the Affordable Care Act less in doubt after November’s election, the utilization of health services is expected to increase.  This bodes well for the medical office market but there was no immediate impact noted in the fourth quarter, according to the survey of more than 6.1 million square feet of medical-only office space in the San Antonio area.  Instead, the market continued along a steady path of recovery.  Although there is still room for improvement, the San Antonio medical office market received a clean bill of health at the end of 2012 and closed out the year with improving vital signs.  The year-end checkup revealed that the citywide vacancy rate improved to 17.9% – down from 18.2% last quarter and 20.3% compared to the end of 2011.  The steady improvement in occupancy supported modest rental rate increases.

New leases and expansions generated 41,939 square feet of positive net absorption in the fourth quarter which raised the year-end total gain to 178,267 square feet. Additional evidence of San Antonio’s vibrant healthcare industry is further revealed in the spillover demand for medical-office space outside traditional medical-only buildings.  Aware of the growing consumerism in health care, many medical providers are actively seeking locations that offer patients convenience and efficiency. 

Demand for medical real estate continues to exceed available product which limits investment activity and financing for the development of speculative medical office projects remains a challenge to new construction.  Although there are a handful of projects currently under construction, the pipeline of new construction is expected to remain relatively slow.  Projects nearing completion include the Victory Medical Center (95,000 sf) located at the southeast quadrant of IH-10 & Loop 1604 along with three 36,000 square-foot medical office facilities being developed by Emerus situated in the Far North, Northwest and Northeast sectors.  Each of the two-story buildings, scheduled to open in the first quarter of 2013, will come online with Baptist Emergency Hospital occupying the first floor.

Click to read related article: Medical-office market vital signs improving, REOC analysis finds (San Antonio Business Journal, 2-22-13)



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