New research and analysis from JLL’s “Q4 2021 San Diego Medical Office Report” further prove the above point. Access to the full report is HERE, with a low-hurdle email necessity.
Some high-level takeaways, via a news release from JLL:
Nearly 280,000 square feet of medical space was absorbed in 2021 on a net basis – a 77% increase from 2020.
After its slight uptick in 2020 due to a short-lived spike in new deliveries, vacancy continues its steady downward course. It dropped two full percentage points in 2021 and now sits at 5.8% – the lowest point since 2006.
2021 marks the tenth straight year of growth in San Diego’s average asking rent across all classes. It rose another 5.5% on the year and is now approaching the $4.00 FSG mark.
There is currently less than 100,000 square feet of MOBs under construction in San Diego County – on par with the lower levels seen during the Great Recession despite today’s relatively strong demand for space.
All-time-high construction prices are impeding new development, but eventually the lack of supply, rising rents and/or a flattening or dip in the cost of materials should open the door for speculative or semi-speculative construction. Until then, conversion of office and retail space will remain the primary solution to the imbalance in supply and demand.
Medical office sales across the country totaled $19.6 billion in 2021 – an all-time high that demonstrates the acceleration in investor appetite for this stable real estate investment class. Portfolio sales hit record levels as well with $7.7 billion of trades, representing nearly 40% of total medical office sales.