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JLL recently released its Tri-State Medical Office report and, among the highlights, the report notes demand for medical space is expected to remain persistent in New Jersey as health care providers — including Atlantic Health System, Cooper University Health Care, Hackensack Meridian Health, RWJBarnabas Health and Summit Health — acquire smaller medical practices and relocate their operations into modern, larger facilities.
According to JLL data, the COVID-19 pandemic accelerated technological advancements and consolidation of medical systems, leading to changes in the medical office market across the tri-state New York metro area, including New Jersey. Developers, investors and health care providers need to understand each area to navigate this diverse medical office market.
Although they make up only 30% of the U.S. population, the people over the age of 55 are the primary consumers of health care services. With people ages 80 and up also forecasted to grow by 50% within the decade, the demand for outpatient health care services is expected to increase significantly.
The same is true for the tri-state area. Over just the next five years, the tri-state region is projected to see 6-10% growth in outpatient demand across much of the region.
JLL researchers said the tri-state medical office market encompasses a substantial amount of space, totaling over 73 million square feet. Notably, the areas with the lowest vacancy rates, including northern New Jersey, Long Island and the Outer Boroughs, showcase a higher prevalence of designated single-use medical office buildings and complexes. Consequently, these regions are particularly attractive to medical providers seeking adequate spaces for their practices.
Northern New Jersey, Long Island and Westchester benefit from having well-developed, purpose-built medical office infrastructure. As a result, these markets tend to
secure larger deals compared with Manhattan, where the landscape is more vertically distributed and characterized by smaller floorplates. On average, medical office lease
sizes in northern New Jersey, Long Island and Westchester reach 23,000 square feet, compared with Manhattan, where the average lease size stands at 10,000 square feet.
JLL believes health care networks will continue to move forward with the development of state-of-the-art facilities. In fact, in mid-2023, Monmouth Medical Center/RWJBarnabas Health broke ground on a $200 million, 150,000-square-foot cancer center at the Fort Monmouth campus in Tinton Falls, while the new $800 million, 875,000-square-foot Valley Hospital in Paramus is scheduled to open in April.
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