Despite down market, medical office space owners remain “healthy”

The health care industry has weathered the recession better than most sectors. That strength appears to have carried over into the commercial property market. Last month the Atlanta Journal Constitution printed this article about the health care industry helping to prop up the health care market:

The health care sector is one of the few bright spots in an otherwise dismal market for office space.

While the recession has left entire floors barren in many high-rise office buildings, demand for space in buildings near hospitals is competitive and that has propped up rents and kept vacancies in check.

Doctors and other medical tenants have weathered the economic slowdown better than retailers and other office tenants. And for landlords, these tenants tend to stay in the same location longer than other office renters and have lower default rates.

Overall office sales are down this year, but the proportion of deals for medical buildings was up almost 11 percent, according to Chris Bodnar, vice president of CB Richard Ellis' Health Care Capital Markets Group. And the vacancy rate for these buildings is a mere 10 percent, compared to 16 for overall office buildings.

And that could go even lower in the next few years as the economy improves and baby boomers continue to age.

This got me thinking about medical office space in Decatur. Although I don’t know what commercial property owner’s vacancy rates are in Decatur, I estimate that at least 11 percent of office-based businesses in Decatur are tied in some way to the health care industry. (Our biggest sub-groups are mental health providers, physicians, and dentists.) That percentage is based off of the number of businesses that have a medical-related NAICS code.

From a business licensing standpoint, it does seem like turnover in retail businesses such as restaurants and shops is more common than healthcare businesses in Decatur, but there are no reports I can easily run in our business licensing system that would back up that observation.