7. Midwest
The Midwest is seeing a lot of new medical office buildings come online at a time when vacancy in the region is above 9 percent and asking rents are in the high teens, below the national average. Sales of medical office properties in the Midwest also registered the lowest average price per sq. ft. in the nation in the third quarter of 2013, the most recent period for which data is available, at $156.
6. Southeast
The Southeast doesn’t have the highest vacancy rate for medical office properties—at 8.9 percent it ranks somewhere in the middle—but the region is experiencing a large influx of new space coming on the market. Meanwhile, asking rents in the Southeast are slightly below the $22 per sq. ft. average for the country. The Southeast did see quite a few investment sales transactions take place in the third quarter of 2013—53 deals valued at $406 million, to be exact—but the average price per sq. ft. was the second lowest in the nation at $206.
5. Mid-Atlantic
The area registered the lowest number (12) and volume of investment sales in the third quarter 2013, at $148 million. It also posted the third lowest price per sq. ft. for medical office properties at $209.
4. Northeast
Not surprisingly, the Northeast has shown a strong performance in terms of occupancy and rents in 2013, with rents in urban centers like New York City at $36.50 per sq. ft. Vacancy was at 9.1 percent. The Northeast—specifically Buffalo, N.Y.—was also the site of one of the most significant medical office building sales so far in 2014—the purchase of Windsong Medical Park by John and Janet Sung for $16.3 million or $226 per sq. ft.
3. Southwest
The Southwest posted both respectable volume in investment sales of medical office buildings in the third quarter of last year, at $313 million, and a strong price per sq. ft., at $252. But the vacancy rate in the Mountains region in particular is still quite high, at 14.8 percent, and asking rents are roughly in line with the national average.
2. California
Medical office buildings in the Golden State showed the greatest improvement in their overall vacancy rate over the past year, by 70 basis points, to 9.2 percent. California was also the area that saw some of the most significant investment sales in January. These included the sale of Foothill Medical Arts Building in Glendora to Heng An LLC and the sale of 1500 Expo Parkway in Sacramento to Sutter Medical Foundation. Meanwhile, cities like San Francisco posted average rents of $33.75 per sq. ft., way above the national average.
1. Pacific Northwest
Based on its low vacancy rate (at 7 percent) and sky-high rents (at $29 per sq. ft.), coupled with the low volume of new construction in the region, Pacific Northwest seems like one of the best bets for medical office space right now. Western U.S. in general experienced strong investment sales volume in the medical office sector in the third quarter, at a total of $384 million.
