The Metro Atlanta medical office building market contains over 15.8 million rentable square feet in 426 properties. Our survey includes medical office properties with over 10,000 rentable square feet. Deliveries steadily increased to the peak of 1.365 million square feet in 2007. In 2008,deliveries fell to 833,000 square feet and 196,000 through 2Q2009. The 198,812 square feet currently under construction in 5 properties is the fewest during the past 10 years. While there are several MOB project start-ups under consideration, the overall market is expected to remain at approximately 16 million square feet through 2010. Absorption remained over an average of 500,000 square feet per year through 2008 - the highest being 788,000 square feet in 2007. Year to date absorption of negative 114,000 square feet, however, reflects the overall real estate market downturn and is an indication that health care real estate is not completely immune to national market dynamics.
The overall effect of large annual deliveries and lagging absorption has pushed occupancy rates to 81.0% - the lowest recorded since the start of 2000 when rates were 95.0%. With limited deliverers and increased demand brought on by demographics, declining occupancy rates are expected level off and hold during 2009 and increase through 2010 to approximately 83.5%.
While average rental rates increase by $1.40/SF to $22.60/SF from 2Q 2007 to 2Q 2008, in part due to class “A” deliveries, mid year 2009 rates pulled back to $21.82/SF. These rates, if not quoted on a full service basis, are grossed up for analytical purposes. As occupancy rates rise with expected return to positive absorption and reduced deliveries, rental rates are expected to increase back over $22.50/SF by year-end 2010.
Give us a call or email Richard Smith for detailed information on these or any other medical office buildings in the Southeast Region. We can also complete full market research studies including available spaces, lease rates, sales comparables and tenant rosters.
