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Special Report

Medical Office National Report

1H 2024

Construction Slows and Healthcare Retailers Shutter,
Mitigating Emerging Vacancy Pressures

New supply is limited outside of Texas. While most medical office construction projects are less than 50,000 square feet, Houston has several large builds slated for 2024, leading to a nationally prominent pipeline. The metro will host nearly 22 percent of medical office space delivering nationally this year. While this creates short-term pressure for Houston, the metro will note the third largest increase in the 65 and over population by 2034, tempering the long-run impact. A well-dispersed pipeline outside of Houston will help limit the national vacancy increase to only 30 basis points this year as overall completions step down from 12.5 million square feet in 2023 to about 10 million this year. Going forward, construction may ease further, given rising material and labor costs. To contend with higher expenses, more future projects may involve traditional office conversions.

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