"Demand’s Healthy for Medical Offices" - Commercial real estate article for The Miami Herald
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By Rochelle Broder-Singer | 5/12/2008
When real estate developer Linda Rozynes lost a South Miami-Dade apartment building to a storm in 2000, she knew she would rebuild the property -- as medical offices.
That was Rozynes' foray into the booming medical real-estate sector, a niche fueled by an expanding senior-citizen population and the trend of performing procedures outside of hospitals. Medical office rents are averaging $28.49 per square foot in Miami-Dade County and $24.05 in Broward, with occupancy at 95 percent in both counties, according to CB Richard Ellis.
The demand has drawn established medical developers and newcomers like Rozynes, as well as office condo developers targeting doctors.
Physicians seeking office space have some unique issues. First, they often spend as much as $50 to $100 per square foot to customize their offices, because they require specialized equipment -- such as plumbing and cabinetry, reinforced floors for heavy equipment and lead-lined rooms for X-ray machines and CT scanners.
''The cost for them to improve their space is extremely high,'' said Kenneth Weston, CEO of medical realestate specialist Kenneth Weston & Associates. ``So for them to move from office to office is extremely expensive.''
Then there's that location factor: Physicians need to have their offices close to their patients and, for many specialists, near a hospital.
Rozynes' 37,000-square-foot building, for example, is on Sunset Drive near 87th Avenue, close to Baptist and South Miami hospitals.
Still, leasing was a bit slow because of competition from office condos. In 2007, 652,329 square feet of office space sold, a good chunk of it targeted at the medical industry.
BUILDING EQUITY
Owning space can appeal to physicians because of the big investment they make in equipment and because they don't move often.
''The clients they serve are generally within a radius of their location,'' said Ford Gibson, principal of Miami-based Gibson Development Partners, which has finished two medical office condos and is developing a third. "They can be in that same location for a long period of time.''
Gibson added that some doctors like building equity in real estate. A doctor on the verge of retiring ''can sell the practice and retain the real estate and rent it or sell the real estate,'' said Gibson, who is also looking at two medical office rental projects.
The competition made leasing of Rozynes' building a little slow, but the last tenant moved in three months ago. ''I was a little blindsided by the office condo market,'' she said. "But then as office condos became more expensive, this became more affordable.''
