Real Estate Forum - November 2008

For $48 million, Grubb & Ellis Healthcare REIT purchased Medical Portfolio Four, five buildings located throughout Arizona, Ohio and Texas. Some of the assets, including 4501 Joe Ramsey Blvd. in Greenville, TX (above), are near a hospital or on the campus of one, such as 1305 W. Jefferson St. in Waxahachie, TX (below).

it was roughly 70% leased, but the occupancy has now hit 92%. “We are significantly upgrading the facility with new mechanical systems,” says Bremner, who points out that the building was previously positioned as a traditional office asset.

Demand for medical office facilities is evident throughout the country, but population growth nodes are especially ripe

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for investment, say experts. Bremner suggests areas like Texas and Florida should be on the radar of any educated investor. Indeed, Marcus & Millichap lists the Southwest and Southeast regions as prime areas of interest, since they are expected to lead the nation in population growth in the age 55-plus cohort, gaining just over 20% each by 2012. “Certainly Florida and the Phoenix area would be hotbeds of activity, as would Colorado because of population gains and quality of life,” says Pontius.

Florida’s demographics were taken into consideration by Geneva when it purchased the Surgical Specialists Medical Building in Ft. Myers this summer. “In Ft. Myers, 75% of the population is 55 or older, so there is tremendous amount of medical offices per capita,” says Farmer, who adds that the company is working on another deal in that market. The 6,910-sf facility is fully leased to Surgical Specialists of South West Florida, which has occupied the building since the early 1990s.

On the whole, the long-term prognosis for medical office remains quite stable. “Doctors aren’t closing up shop. They’re not going to default on their leases,” says Fasulo of RCA. “You throw on top of that just tremendous demographics for medical office space, in that people are getting older and demanding more healthcare. This property niche has been hot for five years now. I expect that to continue indefinitely—or at least until the demographic story changes significantly.” ◆

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