Sunday, March 28, 2010

Do they make this stuff up, or can it really be true?

March's National Real Estate Investor magazine has a story
about one of the stronger segments of the real estate market:
medical offices. Here is an interesting quote from the article:

"The real estate formula is that every patient in the system
requires about 1.9 square feet of medical office space,
according to Cooper. Reforms proposed by President
Obama would add 30 million people to the ranks of the
insured, which equates to demand for 60 million square
feet of additional medical space."

It seems logical, as we baby boomers age, that we should
expect an expansion in medical office space. Just look at
Tamarack Road in Newark where the Medical Center of
Newark and all its associated buildings have gone up in the
last five years or so.

But, 60 million square feet? It is a big country so we need
be be careful around big numbers. There are some 362
Metropolitan Statistical Areas (MSA) in the United States,
according to the Census people. Metropolitan Statistical
Areas are urban areas with a city of at least 50,000
people living there (as of 2008, all of Licking County is
listed as part of Columbus's MSA). If we divide
60,000,000 by 362, it means that each MSA could expect
165,000 square feet of new medical office space. Put that
way, it seems like a reasonable number, maybe even low.

Regardless, once the development community gets fully
engaged in this projected growth market, based on past
history, I suspect we should be prepared to read news
stories in seven or eight years about the "bubble" and
looming crisis of too much medical office real estate.

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