Macro indicators continue to ensure growth in the healthcare real estate sector, according to Cushman & Wakefield Atlanta’s Healthcare Practice Group. As the population who requires healthcare services increases (Americans age 65 and up totaled 49 million in 2016) and the insured coverage rate expands, medical office building (MOB) inventory is strained nationwide. In Metro Atlanta, the year-over-year vacancy rate has decreased from 14.0% to 12.5%, which is well below this city’s historical average.
As rental rates increase, the difference between rates for existing MOBs and those required for new construction narrows. As a result, we predict that the number of new construction starts will grow over the next 24 months, providing expansion opportunities for both private and hospital-owned physician groups.
With the anticipated new MOB inventory and possible relocation of many practices to these offerings, we believe the vacancy rate for Atlanta MOBs will maintain its current downward trend in the near term. However, we anticipate a slowing or stabilization of the vacancy rate for late 2018 thru 2020. As practices relocate to the newer buildings, existing buildings will be backfilled with those practices who are more sensitive to the growing occupancy costs the current market demands.
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