Report: Houston's hot medical office market might be on track to cool
by the numbers
Houston’s medical office market is on a roll.
A report from commercial real estate services company JLL shows net absorption and transaction volume saw healthy gains in 2022:
- The annual absorption total of 289,215 square feet was 50.5 percent higher than the five-year average.
- Transaction volume notched a 31.7 percent year-over-year increase.
Meanwhile, net rents held steady at $26.92 per square foot, up 1.3 percent from the previous year. The fourth-quarter 2022 vacancy rate stood at 15.9 percent.
Despite those numbers, the report suggests a slowdown in medical office rentals may be underway.
“Tenants who may have previously considered building out or expanding their lease agreements are now in a holding pattern due to increased construction costs and higher interest rates,” the report says. “These factors are having a direct impact on financial decisions when it comes to lease renewals, making it more likely that tenants will remain in their existing location for the foreseeable future.”
Still, the report notes “a number of bright spots for the future of healthcare in Houston.” Aside from last year’s record-high jump in sales volume, the report indicates an aging population coupled with a growing preference for community-based treatment “will lift demand even higher in coming years.”
The report shows that in last year’s fourth quarter, 527,083 square of medical office space was under construction in the Houston area, including:
- 152,871 square feet in the Clear Lake area.
- 104,665 square feet in the South submarket.
- 103,647 square feet in Sugar Land.