According to Cushman & Wakefield’s Healthcare Advisory Practice, Phoenix ranked among one of the top 10 markets for leasing activity in 2018, totaling 900,000 square feet. The top 10 most active markets (9.9 MSF) account for 35.5% of all nationwide medical office leasing (27.8 MSF) in 2018.
Ryan O’Connor, Senior Director of Cushman & Wakefield’s Healthcare Advisory Practice in Phoenix stated, in Metro Phoenix, the Southwest and Southeast Valley submarkets have seen the most growth and development activity than any other markets in the Valley. The Southwest Valley delivered the 64,000 SF medical office building (MOB), Estrella Medical Plaza II, and Adelante Healthcare’s 45,000 SF MOB at Abrazo West Campus. In the Southeast Valley, Irgens delivered a 43,000 SF MOB adjacent to Dignity Health Mercy Gilbert Medical Center. In addition, Pacific Medical Buildings (PMB) is planning a multi-million dollar redevelopment at the Abrazo West Campus in Goodyear, AZ and an 80,000 SF MOB, to be occupied by Phoenix Children’s Hospital and Dignity Healthcare, on the Dignity Health Mercy Gilbert Medical Center campus in Gilbert, AZ. Both will be delivered summer 2019.
Rental rates have been the strongest in these two markets with the average rental rate on new deliveries in the $24-25/SF NNN range. Transactions in the nearby second generation spaces have been climbing with an average rate of $22-23/SF NNN. The Northwest and Scottsdale submarkets are close behind and continue to tighten further with very little developable lots available and increasing demand for medical space.
Additionally by 2025, Healthcare & Social Assistance GDP spending is forecasted to grow by 23% in Phoenix (being one of the Sunbelt markets) and by 16% across the 20 largest healthcare markets. For more fast facts on the healthcare sector, check out the infographic here.