Creative Use Of Nontraditional Properties Needed To Head Off Medical Office Space Shortage

The growing demand for healthcare services is threatening to outstrip the supply of medical office space in a number of U.S. markets, according to a new report by Transwestern. 

The report, Medical Office Space Gets Tight, bases its predictions on the anticipated growth in healthcare workers through 2019 and compares average space usage per worker to space that now exists or is currently under construction in 14 markets. 

Current projections estimate that just over 150,000 healthcare practitioners will join the workforce in the next two years, and total demand for medical office space nationwide could range from 150.5M SF to 225.8M SF by the end of 2019, assuming that the space for each practitioner ranges from 1K SF to 1,500 SF.

"There is approximately 110M SF of available medical office space in existing and under-construction buildings in the U.S. as of the second quarter of 2018,” Transwestern Director of Research Elizabeth Norton, the report’s author, said in a statement.

“If all healthcare practitioners added to the economy through 2019 aim to locate within medical office space, absorption of this demand is impossible without a major shift in how people expect and receive healthcare,” she said.

Real estate from other sectors could help alleviate the shortage, the report states, including leasing nontraditional spaces in conventional office buildings or repurposing empty retail space for medical uses.

Norton said the emergence of new forms of healthcare, such as telemedicine, digital health and shared-service centers, could also dampen future demand for space to some degree, depending on how quickly these new approaches are adopted by the healthcare industry. 

Driving the demand for medical office space is the fact that the U.S. population at or over 65 is growing at a rate 14 times faster than those aged 64 or younger, Transwestern Managing Director of Healthcare Advisory Services Jay Johnson said. 

“A greater demand for healthcare services means more workers, and this is going to make healthcare space much tighter in some markets,” he said.

The squeeze is on in markets like New York, Dallas-Fort Worth, Atlanta, Denver and Miami-Fort Lauderdale, where it is more challenging for practitioners looking for medical office space.

New York in particular is facing a steep shortage, with a projected demand of more than 14M SF of medical office space by the end of 2019. At present, a little over 4M SF exists and less than 1M SF is under construction.

Among the metros studied, only Detroit has a surplus of medical office space: demand will be a bit more than 2M SF by the end of 2019, with a supply of more than 3M SF.