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INSIDE A strange dichotomy arose in 2020 for medical office buildings. The property type, often seen as recession-proof rela- tive to others because of the ten- dency of health care needs to ignore economic conditions and continue bringing people in to see the doc- tor regardless of the unemployment rate, suddenly found itself directly in the eye of the storm that has beset the rest of the global economy. When COVID-19 struck the U.S. in March, need for medical real estate ramped up in a way previously unseen in modern history. But, of course, that need was for square feet in hospital emer- gency rooms and beds in intensive care units. Medical office space, usu- ally occupied predominantly by nonemergent physician practice groups, was side- lined as stay-at- home orders kept patients at home, shut down elective medical proce- dures and slammed the brakes on the economic and capital flow activ- ity needed to sustain leasing activity in commercial real estate. However, aside from a steep drop in net absorption of medical office space in metro Denver in the first half of 2020, the disruption seems to have barely registered in market fundamentals. Net absorption clocked in at just 1,542 square feet, according to CBRE research, a decrease of 99% when compared to the first half of 2019. This was the result of pervasive uncertainty in the marketplace that kept medical practices, and compa- nies of all types, from signing leases as they waited to see what the fall- out of the pandemic would be. But another important indicator, the average lease rate, increased slightly. Across the metro area, the average asking lease rate for medi- cal office space crept up by 6 cents to $29.11 per sf. While small, the increase demonstrates the resiliency of the medical office building mar- ket in metro Denver. The vacancy rate for these proper- ties increased from 9% in the first half of 2019 to 10.5% in 2020, but a Considerations for designing medical buildings for seniors and low-vision patients Market assessments, occupancy expectations, a legal ruling and trends are featured Design practices Senior housing PAGE 10 PAGES 17-22 Please see Page 14 Daniel R. Burke, CCIM First vice president, health care real estate, CBRE, daniel. burke@cbre.com A shift to outpatient surgery centers gains momentum as many seek to avoid hospitals Health care trends PAGE 4 Medical office buildings seem resistant to pandemic’s impacts January 2021 Good preleasing numbers suggest continued demand for medical office buildings in the metro area and confidence in a full economic recovery, despite challenges in the greater marketplace. New leases were signed in the second half of 2020 at two of the metro area’s largest new additions to the medical office building inventory, including at St. Joseph Medical Office Pavilion at 1818 Ogden St. in Denver.
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