By JOHN WADSWORTH
Since 2005, the development of medical office projects in Orange County has seen a healthy dose of activity.
This significant increase in activity is being fueled by a number of factors, such as an expanding population and that people are simply living longer.
In the next 30 years, it is reported that OC’s population will increase by one-fifth from its current total of 3.1 million, or an addition of about a half million people. With the baby boomer generation entering its senior years, the segment of the population 60 or older will more than double in size by 2035 from 291,000 to 636,000 people, or a 119% increase.
In OC today, one in every 10 adults is
a senior. In 2035, one in every six adults will be a senior.
An aging and expanding population will push demand for more healthcare and, in turn, push the demand for more medical office facilities to support healthcare providers. Medical real estate developers, both local and from outside the county, are working to provide more facilities.
The current base of medical office space in OC is composed of 220 buildings totaling 7.2 million square feet (not including hospital owned and occupied facilities). Countywide vacancy at the end of the third quarter was 9%, down slightly from the previous quarter, which was 9.3%.
Since 2005, medical office developers have added 22 projects, including ground-up development as well as medical office conversions (where an existing commercial building is renovated to accommodate medical use). These new projects added 674,322 square feet of medical space, or about a 10% increase, to the overall base of buildings. To date, there remains significant demand for new medical space as current occupancy in these new projects is reported at 86%.
Two significant new projects recently completed include the 76,000-square-foot Pacific Medical Plaza in Costa Mesa, just up the street from Newport Beach’s Hoag Memorial Hospital Presbyterian, and the 140,000-square-foot Mission Medical Building on the campus of Mission Hospital in Mission Viejo. Pacific Medical Plaza was completed earlier this year and is reported to be 70% full with the first tenants to begin treating patients in January. The Mission Medical Building has opened and is reported to be full.
Looking ahead, medical office development in OC will remain healthy with nearly 1.2 million square feet of medical projects planned, or due to complete construction, within the next 12 to 36 months.
Eleven medical office projects totaling 438,488 square feet are under construction with completion dates set in the next 12 months. Six of these projects are new ground-up construction with the other five being medical office conversions. Fifteen new medical office projects are planned that would add another 656,702 square feet of space to the market.
If all the aforementioned projects are finished, the addition of 1.2 million square feet of space would represent a 16.7% increase to the current inventory of medical buildings in OC.
The most ambitious ground-up medical office development is occurring in the immediate area surrounding Irvine Regional Hospital and Medical Center. Six projects totaling 390,000 square feet either are under construction or in the planning stages. Half of these Irvine projects are being developed by speculative developers, the other half are owner-user buildings.
Another Irvine project in process is the 68,000-square-foot MacArthur Medical Campus, a medical office conversion project under construction with completion slated for January. MacArthur Medical Campus will offer medical practitioners the opportunity to own condominiums.
Historically, medical professionals have faced a challenge when attempting to establish a presence in OC due to the lack of good alternatives for space. The flurry of development that has occurred since 2005 and the new development in process will offer good options for physicians seeking medical space in today’s market.
With population trends continuing to put a strain on the need for more healthcare and the prescription of more medical space to come, the diagnosis for the medical office market in OC should continue to remain healthy.
Wadsworth is vice president of Colliers Healthcare Services in Irvine.
