Medical Office ‘Condo-Mania’ Is Growing
Healthcare Real Estate Insights | By: John Mugford
While they might not be the perfect prescription for all physicians, medical office condos are becoming an increasingly popular alternative for doctors who have traditionally leased space in medical office buildings (MOBs).
“It’s getting so prevalent in the market right now that it seems everyone wants to get involved in office condos,” says Kenneth Weston, a long-time healthcare real estate consultant and developer in South Florida and the founder of Kenneth Weston & Associates, Inc.. “It’s like condo-mania.”
Even though Mr. Weston calls the current phenomenon a “mania”, he also foresees a long future for medical office condos because of the stability of physicians and other medical condo buyers. On the other hand, things do not bode as well for general commercial office condos, Mr. Weston says.
“One of the conditions that makes it right to introduce office condos to a market is high demand for that type of product”, he explains, “and developers are building general office condos in places where the office market has 20 percent, 30 percent vacancy rates. That just doesn’t make sense because the demand is not there. The reason they’re doing it right now is because the interest rates have been low.”
Mr. Weston began developing medical office condos in the Miami area in the late 1970s purely because of demand – it was what some doctors wanted. Because interest rates are so cyclical, there are periods of time when the product type remains “under the radar”, especially when interest rates creep upward, Mr. Weston says.