Denver MOB Market Picks Up Momentum
Metro Denver’s medical office building (MOB) market recorded strong fundamentals in the first half of 2021, according to CBRE’s Denver Medical Office MarketView H1 2021 report. Positive new absorption of 150,318 square feet was recorded in H1 2021 with On-Campus space contributing to most of the absorption activity. Direct vacancy sat at 10.7% in H1 2021, a modest 28 basis points (bps) increase year-over-year, while overall availability was unchanged at 12.3%.
The average direct asking rate rose to $30.68 per square foot full-service gross (FSG), a 5.4% increase since H1 2020. A total of 174,000 square feet of newly constructed MOB space was delivered to the market in H1 2021 with 70.1% of the space already leased. The Denver MOB investment activity picked up momentum this year totaling $104.9 million in H1 2021, up 101.8% year-over-year.
With absorptions rebounding sharply to pre-pandemic levels in the first half of 2021, the Denver medical office market will continue to flourish as owners realign their space needs and discuss future projects. Though economics is still driving transactions, there has been a flight to quality among tenants that is expected to continue over the next several quarters. The increased demand for healthcare properties is driving strong investor interest as seen by the increased sales activity in H1 2021 which is forecast to be even stronger throughout the balance of 2021 and beyond. While there has been some impact to the medical office market from the COVID-19 pandemic, the activity during the first half of 2021 showed resiliency and a necessity for healthcare space.