{"id":1004718567,"date":"2024-06-24T05:46:23","date_gmt":"2024-06-24T13:46:23","guid":{"rendered":"https:\/\/www.commercialsearch.com\/news\/?p=1004718567"},"modified":"2024-07-01T02:08:18","modified_gmt":"2024-07-01T10:08:18","slug":"houston-a-bright-spot-among-slowing-medical-office-sector","status":"publish","type":"post","link":"https:\/\/www.commercialsearch.com\/news\/houston-a-bright-spot-among-slowing-medical-office-sector\/","title":{"rendered":"Houston a Bright Spot Amid Slowing Medical Office Sector"},"content":{"rendered":"
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\"MOB<\/a>
The sector’s completions and net absorption have both slumped, while the vacancy rate continues to trend upwards. Chart courtesy of Marcus & Millichap<\/em><\/figcaption><\/figure><\/div>\n\n\n

Medical office construction has slowed\u2014especially outside of Texas\u2014and health-care retailers are shuttering, according to Marcus & Millichap\u2019s national medical office report for the first half of the year.<\/p>\n\n\n\n

Most medical office construction projects are less than 50,000 square feet. However, Houston has several large projects slated for 2024, and will host nearly 22 percent of medical office space delivered nationally this year.<\/p>\n\n\n\n

This will help Houston cater to its aging population, which is expected to see the nation\u2019s third-largest increase in cohorts aged 65 and older by 2034.<\/p>\n\n\n\n

Given inflation for material and labor costs<\/a>, Marcus & Millichap expects more future projects to involve traditional office conversions.<\/p>\n\n\n\n

Failing retail sites are another commercial real estate asset option for the medical office sector.<\/p>\n\n\n\n

\u201cThe decision from some pharmacy retailers to offer limited, on-site medical care has emerged as a potential competitor for medical office operators in recent years,\u201d according to the report.<\/p>\n\n\n\n

Marcus & Millichap said that \u201cin practice, this strategy has produced mixed success,\u201d with similar attempts by Walmart and Walgreens proving less than profitable.<\/p>\n\n\n\n

Transaction velocity down nearly 40 percent y-o-y<\/h2>\n\n\n
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\"Medical<\/a>
The Southeast leads the nation for medical office trades. Chart courtesy of Marcus & Millichap<\/em><\/figcaption><\/figure><\/div>\n\n\n

Deal flow in the sector fell in the first quarter, and leading private buyers are finding alternative financing, particularly for assets with smaller price tags.<\/p>\n\n\n\n

Year-over-year as of March, transaction velocity was down by nearly 40 percent. The bulk of trades that took place were in the $1 to $10 million price tranche, according to the report.<\/p>\n\n\n\n

Trades in a lower price tranche have impacted the average sale price. During the trailing yearlong span that ended in March, the mean price per square foot for medical office space was $292, with a corresponding average cap rate of 7.2 percent. Regional differences emerge compared to pre-2020.<\/p>\n\n\n\n

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READ ALSO:<\/strong> Office Sector Adapts Amid Market Shifts<\/a><\/p>\n\n\n\n

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\u201cWhile deal flow has declined from the highs recorded in 2021 and 2022, trades were more closely aligned with pre-pandemic trends,\u201d Marcus & Millichap said.<\/p>\n\n\n\n

Over the same period, half of the eight regions recorded transaction velocity above their pre-pandemic five-year average.<\/p>\n\n\n\n

Cyber attacks common, costly<\/h2>\n\n\n
\n
\"Ransomware<\/a>
The healthcare industry saw the largest number of attacks and impacts due to ransomware. Chart courtesy of Marcus & Millichap<\/em><\/figcaption><\/figure><\/div>\n\n\n

Ransomware attacks are presenting headwinds, as cyber security concerns loom over the health system. A cyberattack in February aimed at UnitedHealthcare cost the company $870 million. According to the American Hospital Association, 94 percent of hospitals reported being financially impacted by the February cyberattack.<\/p>\n\n\n\n

The report said the added expense of cyber security could also prompt cost-cutting in other areas, including real estate holdings.<\/p>\n\n\n\n

In the case of UnitedHealthcare, it shrunk its traditional office real estate footprint after the attack. Other large companies may face similar attacks, which could impact their buy\/sell\/lease decisions of commercial real estate, including medical office, according to the report.<\/p>\n","protected":false},"excerpt":{"rendered":"

The Marcus & Millichap report predicts that more projects will involve traditional office conversions.<\/p>\n","protected":false},"author":3568,"featured_media":1004718580,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21782,21808,37753,21754,23891,21742,51037],"tags":[34836],"class_list":["post-1004718567","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-development","category-featured","category-research-center-finance","category-medical-office","category-national","category-latest","category-trends","tag-marcus-millichap"],"acf":[],"yoast_head":"\nHouston a Bright Spot Amid Slowing Medical Office Sector - Commercial Property Executive<\/title>\n<meta name=\"description\" content=\"A new Marcus & Millichap report expects more future medical office projects to involve traditional office conversions.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.commercialsearch.com\/news\/houston-a-bright-spot-among-slowing-medical-office-sector\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Houston a Bright Spot Amid Slowing Medical Office Sector\" \/>\n<meta property=\"og:description\" content=\"A new Marcus & Millichap report expects more future medical office projects to involve traditional office conversions.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.commercialsearch.com\/news\/houston-a-bright-spot-among-slowing-medical-office-sector\/\" \/>\n<meta property=\"og:site_name\" content=\"Commercial Property Executive\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/CPExecutive\" \/>\n<meta property=\"article:published_time\" content=\"2024-06-24T13:46:23+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2024-07-01T10:08:18+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.commercialsearch.com\/news\/wp-content\/uploads\/sites\/46\/2024\/06\/Screenshot-167.png\" \/>\n\t<meta property=\"og:image:width\" content=\"800\" \/>\n\t<meta property=\"og:image:height\" content=\"617\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"author\" content=\"Richard Berger\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@cpexecutive\" \/>\n<meta name=\"twitter:site\" content=\"@cpexecutive\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.commercialsearch.com\/news\/houston-a-bright-spot-among-slowing-medical-office-sector\/\",\"url\":\"https:\/\/www.commercialsearch.com\/news\/houston-a-bright-spot-among-slowing-medical-office-sector\/\",\"name\":\"Houston a Bright Spot Amid Slowing Medical Office Sector - 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