Vital Signs December 2023: Healthcare Sector Outlook

Better Located, Larger Assets Performing Strongly

Construction in the market has begun to consistently lag behind absorption. The nature of the healthcare asset—highly specified tenants and use cases—often lends to the majority of product being build-to-suit or pre-leased at very early stages. Construction-wise, we have seen certain markets witness a construction boom. For example, the Phoenix market is expecting 38 MOBs with 2.4 million square feet (msf) to deliver

during the next five years. Each quarter for the past two years, the market has averaged 500,000 sf in projects that have initiated construction. Over 1.0 msf has been proposed in the Phoenix submarket of Gilbert alone. This demand has been supported by the expansion of care delivery locations across the sprawling metro Phoenix area, as well as growing hospital requirements, starting at 1.0 msf of total new space last quarter.

MOB Occupancy, Deliveries and Absorption 2018 - 2023

93.0%

6

92.5%

5

92.0%

4

91.5%

3

91.0%

2

Millions SF

% Occupancy

90.5%

1

90.0%

0

Completed SF (LHS)

Absorption SF (LHS)

Occupancy Rate (RHS)

Source: RevistaMed (Completions, Absorption, Occupancy based on Top 50 Markets, 7,500+ sf MOBs), Cushman & Wakefield Research

Demand for clinical space remains quite robust, as health systems and physician practices continue to lease space.

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