January 15, 2015

Docs Want Bigger MOBs

Phoenix healthcare space is trying to find its Goldilocks zone—not too large, as in behemoth hospitals, but not too small, as in small practices in small spaces.

The future belongs to large medical practices, and they want larger but also conveniently located MOBs. “The medical office building market in Phoenix has shifted in recent years from doctors locating in small office spaces to larger practices purchasing sizable buildings,” LGE Design Build president Dave Sellers tells us. Recently LGE started work on Fairview Medical Center near the Chandler Regional Medical Center and Loop 202, which will be partly occupied upon completion this summer by Brain & Spine Center and Desert Kidney Associates.

At a bit more than 20k SF, Fairview is large enough to eventually house three practices. The owners also plan to build a 10k SF surgical center nearby. Doctors want to be near regional hospitals with quick access to transportation, Dave says, adding that medical tenants are also demanding new features to make the space more patient-friendly. Brain & Spine's space, for instance, will include a separate procedural area, large clinical patient space, a large conference room and an educational area, and is designed to help patients in wheelchairs and scooters maneuver easily.

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LA Investor Back for Second Helping of Phoenix

The biggest rule in Los Angeles is there's always a sequel. For Palisades Capital Realty Advisors, its sequel is titled Chandler Corporate Center II. Just months after Palisades picked up Chandler Corporate Center I for $14M, the company picked up the sister 68k SF office building that's leased to five tenants, including Broadcom and Element Payment Services, from the Rockefeller Group for an undisclosed sum. Colliers International's Mindy Korth, Phil Briedenbach and Kirk Kuller brokered the sale for Rockefeller.

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Palisades' Joaquin de Monet previously told us he entered the Phoenix office market because of the market fundamentals being pegged by tech, healthcare and education. Plus, he adds, there's a very educated labor pool and the city's affordable. Joaquin also says he's still looking for more product here. And the Rockefeller Group could be accommodating, given it just completed the 82k SF Chandler Corporate Center III on spec and plans for a building IV in the future.

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Landlords Now Have More Cash for Upgrades

Lincoln Property Co's Megan Watkins, the new president of BOMA-Phoenix, tells us that now that office leasing and rents are on the uptick, Phoenix-area owners have more capital to invest back into their properties. That's both good and bad for owners, she says.

“On the downside, you'll look up to see that a competitive building in your market has just completed a large, shiny renovation that can make your leasing more challenging,” Megan explains. On the upside, owners also have better cash flow, which gives them new resources to keep their buildings current, and to be more creative with rates, TIs and amenities during lease negotiations. “This puts owners and property managers in a strong position to retain tenants and even attract new ones,” Megan says.

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