June 9, 2017
Central Florida’s medical office market has experienced a steady decrease in overall vacancy since 2011, falling another 2.8% points over the past year to 6%. Cushman & Wakefield’s Anne Spencer, who issued a comprehensive report on the MOB market, believes the trend will continue, and vacancies will fall further over the next year.
“Central Florida’s fast growing population is fueling hospital expansions,” said Spencer. “This growth trend will continue in 2017 with the big three healthcare systems — Orlando Health, Florida Hospital and HCA — competing for market share.”
Key findings include:
- Direct triple-net asking rents for MOB space jumped 11.7% year-over-year to $19.12 per-square-foot, per-month. Rent growth is expected to continue through Q1 2018
- Net absorption of MOB jumped to 100,190 square feet in Q1 2017, a significant increase over the same period in 2016. Absorption is anticipated to hold steady over the next 12 months
- Trend of hospitals acquiring physician groups appears to be slowing
- Acquisition and interest by REITs picked up over the past year, but was still low compared to nationwide statistics. Private investor activity is more prevalent, likely due to ability to acquire smaller MOBs valued at less than $3 million. REITs focused on larger, institutional assets over $5 million.
- Cap rates continue to fall in MOB sector, especially for hospital-credit tenants. Even with small, off-campus assets under 20,000 square feet, cap rates have dropped below 7%.
The latest C&W research covers on- and off-campus medical office inventory in numerous hospital clusters located throughout Orange, Seminole, Osceola and Lake counties.
For comments, questions or concerns, please contact Dennis Kaiser