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Washington DC 1 Q10 Medical Office Report
1. HEALTHCARE
MARKETBEAT
WASHINGTON DC METRO REGION MEDICAL OFFICE REPORT
A C&W HEALTHCARE REAL ESTATE GROUP PUBLICATION 1 Q10
ECONOMIC SNAPSHOT PHYSICIANS & MEDICAL TENANTS PERSPECTIVE
With the passage of the Healthcare overhaul now a reality, “What’s happening in the Market?”
healthcare and real estate professionals alike are weighing in Children’s Hospital signed a lease for 18,000 square feet at
on how the law will affect the medical real estate market. Merrifield Town Center Medical Campus in Merrifield, Va.
There is one school of thought that suggests healthcare MedStar Health, a non-profit healthcare organization that
investors across the country, in particular large Real Estate serves the DC and Baltimore regions, signed a 7-year lease
Investment Trusts (REITs), have recapitalized and are for 10,286 square feet at 2000 N 15th Street, Arlington, Va.
aggressively looking for quality, on-campus, medical office CPS Healthcare, a provider of healthcare IT services, signed a
products to purchase. However, this raises a question: is there 10-year lease for just under 12,500 square feet at 1401 Wilson
enough product to satisfy demand? We tend to think not and Boulevard in Arlington, Va.
note that investors have begun looking for product outside their
typical investment criteria. The National Cancer Institute pre-leased 575,000 square feet
in two 7-story buildings at the proposed Life Sciences Center
However, in light of the cuts this legislation makes to in North Rockville, Md. Developer JBG will break ground on
government reimbursement, physicians and hospitals alike are the project in the third quarter of 2010.
going to be faced with the challenge of reigning in costs while
OVERALL VACANCY RATES: MEDICAL VS. GENERAL OFFICE
reaching to meet the demand created by the influx of insured
patients. MOB Vacancy General Office Vacancy
OWNERS PERSPECTIVE 14.0%
12.0%
“What’s happening in the Market?”
In February, Inova Health Care Services purchased 2990 10.0%
Telestar Ct in Merrifield, Va., from Monday Properties for
8.0%
$10,000,000 or about $119 per square foot.
6.0%
As part of a $2 billion expansion in the DC metropolitan area,
Kaiser Permanente has purchased the Russell Building at 8008 4.0%
Westpark Drive in McLean, Va. Kaiser plans to house primary 1Q 06 1Q07 1Q08 1Q09 1Q10
and specialty care doctors, laboratory space, and
pharmacy services at the site. The building’s renovation is The medical office vacancy rate for the Washington, DC
projected to be completed mid-2012. region in the first quarter was 9.5% and continued to remain
“Is now the time to sell?” well below the 13.8% vacancy rate for general office space,
mirroring nationwide trends.
A well-positioned asset in the Washington, DC market will draw
the attention of the larger national players, in addition to local “Prepare for Change”
and regional investors. Physicians will need to identify and take advantage of cost
Moreover, given the recent healthcare law’s reduced saving efficiencies within their existing practice structure to help
reimbursement for in-patient treatment vs. outpatient, a great compensate for potential loss in reimbursements. Physicians
deal of emphasis will be place on outpatient or ambulatory may want to consider and seek answers to the following:
care vs. hospital stays. Owners may want to consider and seek How does the rental rate our practice is paying compare to
answers to the following questions: the rest of the market?
What is the value of my asset in today’s market? Have we been able to take advantage of spatial efficiencies
Can any changes be made to my asset or tenant roster that in order to decrease our overhead costs?
will increase its value? Do we have a strategy in place to lower our rent expense?
Would this be the most opportune time to put my asset on
the market?
