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Medical offices vacancies drop in 3Q, but no sales of major properties

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While medical office building vacancies have continued to drop, there were no major sales in 2012's third quarter, according to a Cushman & Wakefield report.

In July, Coast Income Properties Inc. purchased the Lewis Medical property, a 22,461-square-foot medical office building located at 330 Lewis St. in the Uptown area of San Diego for $9.7 million.

The building is 100 percent occupied by UC San Diego Health System.

The only other sold medical office building that C&W said priced at more than $1 million this year was the two-building, roughly 75,000-square-foot Centre Medical Plaza property at 855 and 865 Third Ave. in Chula Vista.

The property sold for $24.6 million to a joint venture of American Healthcare Investors and Griffin Capital Corp. in the second quarter.

The Centre Medical Plaza was one component of a $52.5 million, five-building, 223,000-square-foot acquisition that also included medical office buildings in Arizona and Texas.

With that transaction, the Griffin Capital/American Healthcare Investors portfolio totaled 76 buildings valued at $715 million.

The C&W report stated medical office vacancy ranged from a low of 6.2 percent in the South Bay to 15 percent in the North County.

A total of 255,205 square feet was under construction in the third quarter, with most of this space being of the build-to-suit variety.

Buildings currently under construction include the 102,000-square-foot Scripps Proton Therapy Center in the Fenton Technology Park in Sorrento Mesa; the 66,365-square-foot replacement medical office building for Sharp Rees-Stealy in Bankers Hill; an additional 56,476-square-foot Tri-City Medical Plaza building in Vista; and 29,364 square feet in a medical office building under construction at the Flower Hill Promenade shopping center in Del Mar.

Of the sizable medical office buildings under construction, only the Tri-City Medical Plaza has any available space with more than half, or 32,477 square feet, available of its 56,476-square-foot space.

The C&W report cited eight medical office facilities, totaling 439,849 square feet, completed in the county this year.

Only two of these -- the 40,398-square-foot 4S Ranch Medical Plaza, with 7,824 square feet available, and a 9,600-square-foot vacant building at 1045 East Pennsylvania Ave. in Escondido – had any space.

The other completed buildings include the 45,000-square-foot Sharp Makena Cancer Center and its adjoining medical office building in Chula Vista, a 71,200-square-foot office building for Kaiser in San Marcos.

Other speculative medical office properties appear to be filling up quickly -- such as the medical office addition at the Flower Hill Promenade, where Sharp Rees-Stealy is taking the entire space, and the 4S Ranch Medical Plaza office building between Rancho Bernardo and Ranch Penasquitos, where 7,824 square feet was available.

The medical office vacancy, which remained more or less flat during the past year, was 9.2 percent direct and 9.5 percent overall.

The medical office vacancy rates ranged from 6 percent for Mid-City areas to 14.3 percent in the North County.

San Diego County has a 13.64 million-square-foot medical office market, which posted 142,982 square feet of net absorption during the third quarter, and 421,623 square feet through the year's first three quarters.

The lease rates ranged from $2.24 the East County to $3.49 per-square-foot in the Mid-City areas.

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