Investors continue to buy older medical office buildings near Orange County hospitals.
The latest example: Los Angeles-based Placentia Medical LLC’s $4 million buy of the Linda Vista Professional Center in Placentia, which is made up of four buildings totaling 19,144 square feet.
Linda Vista, at 1000 and 1041 E. Yorba Linda Blvd., was built in 1966 and renovated in the 1990s. It sold for $208 per square foot,less than other recent medical office sales that averaged in the high $200s per square foot.
Michael Lawrence, vice president of investments at Marcus & Millichap Real Estate Investment Services’ Newport Beach office, and David Black, a senior associate in the brokerage’s Long Beach office, represented Placentia Medical and the seller, Linda Vista Associates.
With vacancy rates hovering around 1% in prominent medical zones such as Newport Beach, buildings near hospitals are commanding premium rents.
Even though medical office buildings are on average 25 years old, landlords are asking rents of $3.05 per square foot a month, as compared with the $2.74 square foot average rate for general office buildings in OC.
Linda Vista, which is 96% full, is within walking distance of Placentia-Linda Hospital.
With such low vacancy rates, investors are buying older or lower-class buildings to collect the stable rents. Doctors and related medical practices are less likely to move because they would have to build a new patient base, so vacancy rates stay fairly static, increasing that building type’s value in spite of older construction.
Lawrence and Black recently sold a 1961 building on La Palma Avenue near Anaheim Memorial Medical Center.
Besides the Linda Vista deal, there have been several other medical office building sales in OC this year.
Last month, Christie Development paid $17.35 million to Mission Viejo Garden Plaza LLC for a 64,022-square-foot medical office building on La Paz Road in Mission Viejo. That building sold for $271 per square foot.
And Glenborough Realty Trust paid $20.5 million to Mammoth Equities LLC for the 72,980-square-foot Saddleback Financial Center (which is a medical office building despite its name) in Laguna Hills. Saddleback Financial went for $281 per square foot.
Choco Realty Corp., an affiliate of Children’s Hospital of Orange County, paid an undisclosed amount to PRG Investment Equities LP for the Orange Medical Complex, a seven-story medical office building near CHOC’s campus.
Market watchers expect more medical office buildings to trade hands in the near future as some 24 projects are either planned for development or are under construction in OC, according to an earlier Business Journal interview with John Wadsworth, vice president at the Irvine office of Colliers International.
This adds to the existing 190 medical office buildings with about 6.8 million square feet in the county.
Irvine Heritage Medical Plaza (see Healthcare column, page 66) has about six of 26 planned medical condominium units still available. Irvine Heritage, which is in an Irvine Spectrum area specifically earmarked for medical development, is set for a mid-November completion date.
In Fullerton, Accretive Realty Advisors Inc. of Newport Beach is moving ahead with Providence Center, a mix of medical and retail space. Providence, which is located west of St. Jude Medical Center, counts more than 100,000 square feet of space offered to doctors.
And in Costa Mesa, Wadsworth is marketing Pacific Medical Plaza, a four-story, 76,500-square-foot medical office building near Hoag Memorial Hospital Presbyterian.
Brown Associates of Irvine is developing the $18 million Pacific Medical Plaza on the site of two former trailer parks.
