Market Highlights
- Total medical office inventory: 17.1M SF
- Medical office space leased in 3Q24: 207.5K SF
- 3Q24 sales volume: $115.1M
Leasing Activity
The third quarter of 2024 marked the second consecutive period of negative net absorption, following 10 quarters of positive absorption. Overall vacancy rose slightly to 13.1%, up from 12.8% in Q2, and average asking rents decreased to $29.59/SF per year, down by $0.39 quarter over quarter. While these shifts are minor, we will continue monitoring for emerging trends. Notably, tenant business models are evolving, with some tenants now becoming real estate owners, which reflects a shift in long-term real estate strategies. Additionally, we’re seeing second-generation medical spaces returning to the market, creating new opportunities for expanding medical practices to secure well-suited, previously built-out spaces.
Sales Activity
Sales activity in the third quarter reached over $115 million, primarily driven by major recapitalizations. However, market momentum slowed toward the end of the quarter due to uncertainty surrounding the election and fluctuating interest rates.
Construction
The recent trend of no new deliveries for medical office properties has shifted, with several developments now underway including:
- The +/-60,000 SF Abrazo Buckeye Medical Office Building, located off Roosevelt and Verrado Way in Buckeye, developed by Cambridge Holdings, Inc.
- The +/-30,000 SF Rancho Santa Fe II in Avondale, developed by MCR Companies
- PMB’s +/-50,000 SF Goodyear Medical Plaza in Goodyear
- The upcoming +/-66,000 SF Celebration Medical Center in Gilbert
Additionally, office-to-medical conversions and accommodating office owners are helping to alleviate some of the demand pressure for medical tenants.
Market Breakdown
The information in this update was composed by the Kidder Mathews Phoenix healthcare brokerage team of Michael Dupuy, Fletcher Perry, Rachael Thompson, Perry Gabuzzi, Chad Sutton, and Zack Harris.
Data source: CoStar
About the team
The Kidder Mathews team of Michael Dupuy, Fletcher Perry, Rachael Thompson, Perry Gabuzzi, Chad Sutton, and Zack Harris specializes in healthcare real estate services with a strategic focus on the greater Phoenix region. For more information, visit their online team profile here.
About Kidder Mathews
Kidder Mathews is the largest fully independent commercial real estate firm in the Western U.S., with over 900 professionals in 19 offices across Washington, Oregon, California, Idaho, Nevada, and Arizona. We offer a complete range of brokerage, appraisal, asset services, consulting, and debt & equity finance services for all property types. Kidder Mathews averages over $10 billion in transaction volume, manages more than 55 million square feet of space, and conducts 2,600 appraisal, consulting, and cost segregation assignments annually. For more information, visit kidder.com.
Contact
Michael Dupuy, Senior Vice President
Fletcher Perry, Senior Vice President
Rachael Thompson, Senior Vice President
Perry Gabuzzi, Senior Vice President
Chad Sutton, Associate
Zack Harris, Associate
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