Los Angeles Medical Office Market Outperforms Nation

LOS ANGELES, CA--Marcus & Millichap Real EState Investment Services reports medical office properties in the Los Angeles metro continue to perform favorably, despite the nationwide recession, and healthcare reform bodes well for the sector’s future performance.

Unlike other asset types, medical office properties continue to garner investor demand by exhibiting considerable resistance to the economic downturn.

Medical office vacancy in Los Angeles is currently 8.7 percent, while traditional offi ce vacancy in the metro is 11.5 percent.

By comparison, the U.S. averages for medical offi ce and traditional offi ce vacancy rates were 11.7 percent and 15.2 percent, respectively, in the fi rst quarter. Much of the medical offi ce sector’s resilience can be attributed to the positive state of the healthcare industry.

While nonfarm employment in Los Angeles is forecast to weaken further in 2009, demand for medical offi ce space will get a boost from growth in the education and health services industry, where employers are expected to add almost 10,000 positions by year end.

The United States as a whole is also projected to record growth in education and health services employment this year, starting with a 0.4 percent expansion in the fi rst quarter.

During the same period, education and health services firms in Los Angeles created more than 7,000 jobs for an increase of 1.4 percent.

These gains point to continued demand for medical space; however, as the recession wanes and the unemployed return to work, healthcare requirements will grow, further strengthening the medical office market.

A further boost to the medical office sector may come from the new administration’s healthcare reform efforts to broaden medical coverage and access.

Los Angeles has one of the highest uninsured rates in the nation, with more than 25 percent of the population lacking health coverage, compared to 16 percent nationwide.

With 75 percent of the metro‘s inhabitants covered, there is approximately 4.2 square feet of medical offi ce space per insured individual. An increase in the insured rate to even 90 percent of the population by 2013 would necessitate roughly 8 million square feet of additional medical office space, using the current ratio.

For a complete copy of the company's report, please contact Stacey Corso, stacey.corso@marcusmillichap.com