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Demand for medical office space in its infancy, notes High Income Real Estate

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In October 2007, Kathleen Casey-Kirshling became the very first baby boomer to file for social security benefits. Behind her were another 80 million boomers waiting to file, retiring by the thousands shortly after, clearing out retirement accounts, and spending billions in disposable income to keep their bodies in top shape.

"We face a tsunami of spending due primarily to the retirement of the baby boom generation and rising health care costs," said David Walker, comptroller general of the Government Accountability Office, as quoted by Fox News. "We're going to have tens of thousands of baby boomers retiring every week over the next decade or so…”

And because this group expects to have longer, more active lives, they’ll spend heavily – at any cost -- to keep their bodies in tip-top shape. Retailers, marketers, doctors, gym equipment companies, and hair experts alike have already picked up on this very trend, as ten thousand boomers retire by the day for the next 20 years.

It’s also taken the commercial real estate market by storm, notes High Income Real Estate, a firm linking accredited investors with top Class-A commercial real estate opportunities. With the Affordable Care Act firmly in place, medical office space demand for Class A property has been on the upswing. We’re already seeing opportunities throughout the country on the heels of patient volumes and a new massive influx of capital into local communities, says the firm.

Others see similar growth.

  • “The goal of ‘Obamacare’ is to lower the price of healthcare, so the efficiency of medical office space is going to have to increase to provide the same amount of care with less cost,” said Garth Hogan, executive managing director of global healthcare services for Newmark Grubb Knight Frank, as quoted by Commercial Property Executive. “You’re going to see a need for large amounts of square footage leased by large groups and hospitals; they’re going to see more patients than they’ve ever seen before and see them quicker.”
  • Along with ObamaCare, the aging population is increasing the demand for medical office buildings. In fact, according to Bloomberg, sales of such properties hit $6.67 billion in 2013. That’s the “second-highest total in 13 years.”
  • Every day for the next 20+ years, more than 10,000 baby boomers will reach retirement age, increasing the overall demand for medical office space. “People over the age of 60 visit a doctor’s office twice as often as does the general population and are prescribed four times the number of prescription medications,” notes commercial real estate services firm, Cassidy Turley. “Investors are clearly savvy to these trends. While sales volume for nearly all CRE product types are still hovering at 2004 levels, sales of medical office buildings posted a record high in 2012.”
  • “’It’s a really competitive space,’” said Steve Sikes, manager of real assets at the Alaska Retirement Management Board, as quoted by Bloomberg, “which is considering buying $150 million to $200 million of medical offices in what would be its first direct purchases of the properties. ‘Hopefully there’s enough of these out there for everyone.’”
  • As 32 million Americans pick up health insurance, “the demand for medical office buildings by 19 percent by 2019,” according to the Urban Land Institute. “The need for an estimated 64 million square feet of additional MOB [medical office building] space in the coming decade dwarfs the 6.3 million sf that will deliver this year.”

Such sentiment is tough to ignore. Growth in this space has only just begun.

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