Darren Lizzack, Associate Vice President
Randy Horning, Senior Associate
With more than 30 million newly insured people as a result of the Affordable Care Act (Obamacare), there is increasing demand in New Jersey, and across the country, for medical offices. New Jersey is more developed and densely populated, leaving physicians and other medical professionals in the dilemma of not being able to move to the suburbs and build out and own their own medical offices as is the case in much of the rest of the country.
The plight of New Jersey’s suburban office market in terms of high vacancies as companies increasingly gravitate to the urban centers may, in the long term, provide a potential solution, as these obsolete traditional office buildings and office parks have been the subject of discussion for conversion to other uses, including medical. Many questions remain, including the adaptability of such buildings to the technology required by medical users, with cost being a major factor, as well as something as basic as parking ratios and whether such sites have enough room for the higher ratios required by medical use.
And overall, the cost to build out medical, whether it is new construction or conversion of an existing building is substantial, particularly a factor at a time when the industry is in a relatively lag period. That factor circles back to what shakes out from Obamacare, given the fact that the program is under attack in some quarters, mostly political, and its future is uncertain.
There are legal issues facing the industry as well. For example, if medical office leases are out of compliance for six months, and they are not month-to-month leases, they lose safe harbor protection. At the same time, attorneys representing medical tenants are increasingly contacting commercial real estate brokers for space valuations.
The bottom line is that for the medical office sector, this is a time of both opportunity and uncertainty, a scenario that remains to be played out. It is incumbent upon those in the industry to carefully weigh their options before making any long-term decisions. Consider contacting a broker for a professional opinion. My phone is always on.
Darren Lizzack, Associate Vice President
101-478-7372
dizzack@naihanson.com