Denver’s Medical Office Market Shows Signs of Resiliency in First Half of 2020
While the MOB market did soften as expected following the onset of COVID-19, strong preleasing is cause for optimism. According to CBRE’s biannual report on the Denver medical office building market, which covers the first half of 2020, three projects totaling 124,000 square feet were delivered in the first half of the year, with 88.8 percent of the new supply pre leased. At the close of the second quarter, over 344,000 square feet of new MOB space was under construction. One was the 89,000-square-foot MOB at 100 Cook Street in Cherry Creek, which was 100 percent leased to UCHealth upon delivery.
“Healthcare consumers increasingly expect greater accessibility and a better experience when seeking out medical care. In response, healthcare providers continue to develop locations that are easier for patients to access. Outpatient visits to medical office buildings show no signs of slowing down and, due to this growth, MOBs continue to be the most popular property type within the healthcare real estate sector. With fundamentals that are more cycle-resistant than other more traditional property sectors, both tenants and investors are drawn to the consistent stability and positive income growth of MOBs,” said Stephani Gaskins, associate, CBRE.
The largest on-campus project under construction is the 96,600-square-foot St. Joseph Medical Office Pavilion, expected to deliver in fall 2020, which recently pre-leased 8,699 square feet of space to Children’s Medical Center. Another notable build is the Synergy Medical Center, which will bring 90,000 square feet of MOB space to the Southeast submarket in early 2021.
Since the beginning of the year, three MOB properties traded hands for a total volume of $52.0 million with an average price per sq. ft. of $241.80. The largest sale in the first half of 2020 was Ridgeline Medical Campus, which traded for $33.5 million ($244.54 per sq. ft.) to Healthcare Realty Trust.