The overall vacancy rates shot up dramatically from 5% and 8% in 2008 to over 30% in 2009. During this time seven new MOBs were completed totaling 165,226 square feet. Notable MOBs being the 60,000 square foot Northside Cherokee Medical Office Center, the 23,500 square foot Parkbrooke Professional Building and The Professional Buildings at Woodstock project with three new MOBs totaling approximately 57,000 square feet – all delivered with a combined vacancy of over 75%. With net absorption of only 26,000 square feet, market supply overshot demand creating the increased vacancy rates. With 66,000 square feet completed in 2010 along with no positive absorption, vacancy rates have continued to climb to 36.2% in first quarter of 2011.
An interesting trend, considering the high vacancy rates, is the increase in the average quoted rental rates. Prior to the deliveries in 2009 the average quoted rental rates hovered around $17.50 per square foot plus common area maintenance and operating expenses. By year end 2009 quoted rental rates reached $25.95 per square foot. Rates pulled back slightly in 2010 by $1.50 per square foot. The current quoted rate of $24.75 is an indication of owners’ reluctance to lower rates and corresponding property market value based on capped net operating income. While quoted rates remain high the overall effective rates with free rent, building allowances and landlord incentives can be several dollars per square lower than quoted rates.
For a complete report of supporting data and/or request for a market study for areas not yet reported on this blog, please give us a call or email Richard Smith, CCIM. We can also provide complete full market research studies including available spaces, lease rates, operating expenses, sales comparables and tenant rosters on medical office buildings across the Southeast Region. We work with health care professionals evaluating real estate options.
