Medical Real Estate Market Update – 2019 Q2


It has certainly been an entertaining quarter, filled with drama and political changes. The US-China trade discussions were restarted at the end of June, after threats and counter threats from both parties. There is no clear path defined yet, but at least for the time being it will provide hope to the markets that a resolution might be possible, especially as we approach the US presidential elections next year.

In the UK Prime Minister Theresa May, resigned early as a consequence of the Brexit stalemate. By the time you read this article there is a high probability that Boris Johnson should be the new Prime Minister of the United Kingdom.  

The European Central Bank (ECB), has nominated Christine Lagarde to replace Mario Draghi, opening the debate who will replace her at the International Monetary Fund (IMF). Not only will Christine Lagarde take on the role of President of the ECB, but the European Commission (EC) is also appointing a new president. (The EC is an institution of the European Union (EU), responsible for proposing legislation, implementing decisions, upholding the EU treaties and managing the day-to-day business of the EU)

With new leadership comes different policies and new direction. This uncertainty can influence the market either positively or negatively depending who fills the top positions. The current political front runners have the support of the market at this stage, and there is hope that the ECB will cut the interest rates and provide further Quantitative Easing, as indicated at the previous ECB rate decision meeting.

This encouraged Trump to put further pressure on the Fed to follow by cutting interest rates in the US. The market has been looking for any indication that this might happen, and indicators are that we could see a rate cut before the end of July. The June employment data gives a completely different picture as the American economy appears to be humming along briskly, showing a continued low unemployment rate, historic trends in job growth, and rising wages. Any decision by the Fed to cut rates in July will be controversial and will no doubt be seen as politically motivated.

Overall, the US economy is performing well, and any rate cuts will support the commercial real estate market.


Medical 7 is in Dallas.

The Dallas–Fort Worth economic growth continued in May. Payroll employment rose, and unemployment remained at a 20-year low. Dallas has added jobs at a 3.7 percent (annual rate), that equates to 40,290 jobs and the unemployment rate dipped to 3.0 percent in metroplex.

The Dallas and Fort Worth business-cycle indexes expanded further. Home prices rose in the first quarter, and housing affordability improved, likely due to a drop in mortgage rates.

The Construction sector has not seen further increases in quarter 2 from quarter 1 and vacancy levels have kept steady at 8,5% p.a. but rent growth has continued to soften from Q1.


Medical 1, 2, 3, 5, 9 and 10 are in Atlanta.

Job growth continued its upward trend in Metro Atlanta during the second quarter. According to

the Bureau of Labour Statistics, employment in the Atlanta Metro area grew by more than 52,000 jobs between May 2018 and May 2019. This is a growth rate of 1.8%, indicating some slowing. As previously mentioned, new job announcements continue to dominate the headlines and Metro Atlanta’s office market looks set to maintain its growth throughout 2019.

There has been around 998,933 square feet construction completed during the second quarter, causing the vacancy to tick up to 11,94% from 10,03% the previous quarters.


Medical 12 is in San Antonio.

The San Antonio economy expanded temperately in May. The unemployment rate dropped further, but the San Antonio Business-Cycle Index decelerated to a pace close to its long-term trend. Payrolls declined last month but had grown slightly during the three months through May. The professional and business service sector posted solid growth, while leisure and hospitality saw weakness. Wages improved, but housing permits declined.

The San Antonio unemployment rate declined for the fourth consecutive month, to 2.8 percent in May. This is significantly lower than the state’s 3.5 percent and nation’s 3.6 percent rates. The metro’s labour force has contracted at an annualized rate of 0.2 percent so far this year.

No additional construction projects have started since Q3 2018, which is supporting the current rental growth of 2,3%. The rental growth has been steady from the past quarter.


Medical 8 and 14 are in Austin.

The Austin economy remained healthy in May. The Austin Business-Cycle Index accelerated and remained above its long-term trend. Labour force growth remained restricted, though recent job growth was strong, particularly in the construction, mining and information sectors. Austin’s unemployment rate declined from 2.6 percent in April to 2.5 percent in May, the lowest posting since December 1999.

Hourly wages declined in May, while total construction permits rose.

Corporations cite lower cost of living and improved quality of life for their employees as the main reason for locating and expanding in Austin.


The current economic conditions in the US remain favourable in the near term, specifically in the locations that we have invested in.

All indications are that the Fed might have enough support to start to cut interest rates in the second half of the year, which should encourage spending and underpin growth in the economy.

Article By: Willie Oelofse
Global Due Diligence Manager at OrbVest



The content and information herein contained and being distributed by Orbvest are for information purposes only and should not to be construed, under any circumstances, by implication or otherwise, as advice of any kind or nature, or as an offer to sell or a solicitation to buy or sell or to invest in any securities or currencies herein named. The information was obtained from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Past performance does not guarantee future performance.

Any market data or information used herein is for illustrative and informational purposes only. Please get the advice of a competent advisor before investing your money in any financial instrument or product and it is your responsibility to obtain the necessary legal, tax, investment, financial or any other type of advice in this regard.


Subscribe to receive investment news and updates delivered to your inbox

Share this article:

Share on facebook
Share on google
Share on twitter
Share on linkedin