Medical-Service Properties Climbing Property Preference Charts

Chicago, Illinois – March 15, 2007 – Investors and developers are riding the population curve. As such, developers keenly follow strategic development trends based on population. As such, tracking investors’ property type preferences is a useful gauge for measuring development trends.

Property preferences are strategic decisions more easily measured in decades. During the 1970s, capital markets hungered for suburban properties of all types, particularly industrial, retail malls and multifamily. In the 1980s, syndication and foreign capital drove suburban and downtown multifamily and office development. In the 1990s, two opposing property development models flourished -- farther-out suburban communities and downtown redevelopment. In this decade, ’smart growth’ continues the focus on urban redevelopment, including resurrecting older areas surrounding downtown districts and using ’green’ technologies.

Looking forward into the next decade, desirable property types will mirror population trends and favor baby boomers:

• Medical Office Buildings - The fastest growing sector of the economy is healthcare. The medical office sector is growing despite extremely high costs, often over $150 per square foot for tenant improvements.
• Research Office/Industrial Lab Space – Yes bulk warehouse and distribution are important. However, lab and research space is changing price points on the high-end of the spectrum. Lab space costs often start at $400 per square foot and can peak in into the four-digit-per-foot range.
• Senior Living - All classes of senior living show promising growth (e.g. independent, assisted living). Similar to other property types following the population bubble, senior living quarters represent some of the highest prices per foot of any housing units in the markets. Contrary to popular belief, seniors prefer larger dwelling (one and two bedroom units).

OBSERVATIONS

John Oharenko, Advisory Board Member of the Real Estate Capital Institute notes, “Mixed-use developments oriented towards medical service-sector locations with strong public transportation linkages should outperform the markets, even at higher land costs.”


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Contact Information

Nat Zvislo

Research Director

The Real Estate Capital Institute

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