Flagler, MAS AJP to Develop South Florida MOBs

The partners will break ground on three facilities later this year, with two more planned.

Flagler Healthcare Solutions and MAS AJP, two major South Florida health-care real estate firms, have formed a development partnership. The duo, titled FLAGLER MAS AJP, will break ground this fall on three medical office properties, one each in the Westchester neighborhood of Miami, Port St. Lucie, Fla., and Boynton Beach, Fla. Two more will follow.

MedSquare Boynton Beach
MedSquare Boynton Beach will be one of the three medical office buildings to break ground this fall. Image courtesy of MAS AJP and Flagler Healthcare Solutions

All properties, varying in size, will be MedSquare locations, a brand created recently by MAS AJP. The first in the series, dubbed MedSquare Health, is a 120,000-square-foot property at 9408 SW 87th Ave. in Kendall, Fla., that came online in 2021.

MedSquare Health includes such amenities as oversized passenger and service elevators, fiber optic internet, meeting rooms, a cafe, and dedicated HVAC and electrical for each office. The property also has a parking ratio of 7 spaces per 1,000 square feet, with valet and reserved parking.

In 2022, MAS AJP developed MedSquare Place + The Contemporary, a 95,000-square-foot medical office building together with an 85-unit independent living community at SW 92nd Ave. and Coral Way in the Westchester neighborhood of Miami.

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The launch of the joint venture aims to bolster the partners’ market position in the health-care sector. Flagler, which manages more than $1 billion in health-care assets worldwide, including inpatient, outpatient and post-acute care facilities, brings its investment services and management expertise to the table, while MAS AJP brings its construction and development experience.

Due to the obsoleteness of much of the existing medical properties stock in the U.S., the need for new Class A medical buildings in the marketplace is “dire,” according to Chris Coots, a founding partner of Flagler.

MOB vacancies low, development slow

The fundamentals of the overall U.S. office market may be weak, but medical office properties are considerably stronger, with vacancies still under 10 percent nationwide as of mid-2024, according to Marcus & Millichap’s Institutional Property Advisors. That is up from pre-pandemic levels of around 6 percent, but still at least half the vacancy rate of ordinary office assets.

Still, MOB development is down as the property type faces the capital market constraints common to all commercial real estate. Overall completions will drop from about 12.5 million square feet in 2023 to about 10 million this year, IPA forecasts.

Investor interest has slacked off as well, IPA notes. During the 12 months ended in March 2024, transaction velocity was down by nearly 40 percent compared with the same period a year earlier. Most of the trades that did take place were in the $1 million to $10 million price range, where capital market access isn’t always as important as in bigger deals.

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