We've all been hearing about the significant uptick in materials and labor costs associated with construction over the last number of months, particularly lumber which has been the focus of many a meme. That spike is beginning to show up in the cost of medical office projects breaking ground in 2021.
Medical Office (MOB) construction completions, which were near peak levels just one year ago have fallen to multi-year lows as of the 1st quarter of 2021. According to newly released Revista data, 18.6 million square feet (MSF) of MOB space completed in the year ending 1Q21.
While the amount of outpatient facilities started or completed during 2020 fell by about 9.7 percent from the previous year, the number of healthcare real estate projects taking place remains quite healthy
Occupancy has remained stable throughout 2020 and into 2021, but quarterly absorption reflects some level of negative impact, although short in duration, in the third quarter of last year. While the average each quarter for absorption in the top 50 markets has been around 3.2 million square feet, in 3Q20 that total fell to just 800K. Interestingly, this impact shows to a greater extent in the largest 10 markets.
Even though the professionals involved in MOBs correctly predicted that investor demand would remain strong for the product type during the COVID-19 pandemic, some involved in development expressed concern that construction numbers could fall as healthcare systems and providers would be forced to focus on a surge of patients instead of planning new projects.
Revista has posted the 4Q20 MOB Sector Quarterly Brief. Available for a limited time this report provides an executive level overview of supply, demand and rent fundamentals for the aggregate top 50 metros as well as the top 10 markets ranked by total square feet (SF).
Revista has updated its annual look at the size and scope of the health care real estate sector. This update measures the real estate size and value of general acute care hospitals and outpatient buildings across the contingent United States.
Despite some delays and postponements of projects during the early months of the COVID-19 pandemic, a group of executives with some of the leading healthcare real estate (HRE) development firms are saying things are picking.
Despite the challenges this year with COVID-19, medical office projects continue to break ground. Interestingly, the proportion of 3rd party developed projects starting is increasing as the year progresses.