Healthcare Industry Remains Strong in Struggling Economy

The medical industry in New Jersey has always had a demand for quality medical office space. Specifically, the demand for medical office space in Morris County continues to be active and steady because of both the demographics and the number of hospitals/medical service providers that service Morris County. Morristown Memorial and Saint Clare’s Hospital are the largest hospitals in Morris County while others such as Atlantic Rehabilitation Institute, Chilton Memorial Hospital, Greystone Park Psychiatric Hospital, Kindred Hospital at Morris and Kessler Inst. for Rehabilitation call Morris County home. With the number of medical facilities coupled with the large population of Morris County, it’s no wonder that doctors prosper here and establish growing practices in all fields of medicine.

One reason that suggests that the healthcare industry will see sustained growth is the aging of the generation known as the ‘baby boomers’ (loosely defined as the 78 million Americans born between 1946 and 1964). It is widely recognized that this is one of the largest generations we have seen and experts predict that total US healthcare spending will double to just over $4.3 trillion by 2017- or nearly 20% of the nation’s gross domestic product. Even if the industry does not grow to the level that most experts are predicting, we all agree that the ‘baby boomer ‘generation will have a profound impact on the healthcare system as we currently know it. These are just some of the reasons medical buildings are considered solid long-term investments and very much sought after properties.

Even in these trying economic times, the medical industry continues to hold its own and thrive. Not all medical practices fare these hard times as well as others, but in general, the medical industry is one of the few industries that bring positive movement to today’s office market. We see this first hand through the constant stream of calls & traffic we receive on the various medical buildings we represent. In one of our recent transactions, at our exclusive listing at 3219 Rt 46 in Parsippany, we represented an OBGYN and placed the practice in 2,210sf for a 10 year term. We were able to achieve an average price in the upper $20 range. This is due to the demand for a true medical facility and the Landlord’s (Larken Associates) ability to design and build the space with the tenant’s willingness to commit long term. Last year, Larken Associates further solidified the building (which is 92+% leased) when an ENT group moved into the building from Denville.

Another one of our medical listings is at 199 Baldwin Road in Parsippany. We have a great unit that has seen a large amount of activity while marketing it. One of the positive attributes of this space is that it is fully built-out from the former doctors and with some simple paint and carpet, it’s ready to go. It offers 8 exam rooms (6 of which have sinks and all have cabinetry), two interior bathrooms and two waiting rooms, one for adults and one for children. The asking price for this unit is $28 full service gross. On the negative side, we have competing uses in the building which has limited the type of medical practices we consider acceptable.

History indicates many doctors express an interest in owning their own real estate. This is and has been a trend over many years. We see a continued interest in purchasing smaller free-standing buildings or condominium type arrangements, particularly with smaller practices (1-3 doctors). With the lack of medical condos (or the small medical buildings) in the market, they are extremely hard to find and typically do not last very long. In addition, with the amount of interior improvements involved for generic medical space, the tendency is to commit to a location on a long-term basis, therefore making ownership a more attractive option for most doctors.

Aside from the Morris County medical properties noted within, we have medical listings throughout Bergen, Essex, Passaic, Somerset and Warren Counties. Even in today’s market, all have seen a steady stream of traffic and interest from the medical community. Although we have seen a decline in the activity of the general office market, we see the healthcare industry remaining constant through the economic downturn. As we perceive it, as the demand for medical attention rises, so will revenue streams for doctors, again solidifying our sentiment that the medical/healthcare industry will only continue to grow.



-Rob Borny & Greg Reid