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H1 2022 Norfolk Medical Office Report

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"Construction costs and supply chain issues continue to be key concerns in medical lease transactions. Overall relocations costs have kept many tenants on the sidelines and in “renewal mode”; however, new medical lease activity picked up the first half of 2022. With recently completed deals and active transactions our healthcare team is on track to complete well over 125,000 square feet of new medical leases in Hampton Roads in 2022. We are seeing activity vary significantly from submarket-to-submarket as some markets have limited demand while others are very active. Rental rates continue to rise as Landlords take advantage of the limited medical inventory and attempt to position themselves to solve the construction cost conundrum encountered on the majority of lease transactions. Second generation medical space continues to see the lion’s share of activity due to lower construction costs and lease term flexibility when compared to first generation space."
Chris Kieran| Senior Vice President, Healthcare Services

Key Takeaways

  • During H1 2022, the Norfolk medical office market experienced 79,104 square feet of positive net absorption, ending the year at a 7.5% vacancy rate. This positive absorption was spread throughout the market, with no submarkets seeing negative net absorption.
  • Market rents have shown impressive gains in recent years, especially quality, Class A space. Since H1 2018, Class A rents have increased by $4.28, or 21%, ending H1 2022 at $24.65 per square foot.
  • While medical lease transactions have consisted of new deals and renewals; renewals have been the central theme as most medical tenants have opted to stay in place due to relocation costs. With that said, there were some significant new lease transactions in the market as Gastroenterology Associates of Tidewater is expanding and relocating to over 13,000 square feet in Chesapeake, Hampton Roads Community Health Center leased 19,000 square feet in Norfolk, and National Neuropathy Center leased 5,000 square foot suites in Norfolk and Virginia Beach.

MidYear Norfolk Medical Office

H1 2022 Norfolk Medical Office Report

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Related Experts

Christopher Kieran

Senior Vice President

Norfolk - Main

Chris Kieran is a Principal in the Norfolk Colliers office and brings over 22 years of commercial real estate experience to his specialty of representing owners and occupiers of office and medical properties throughout Southeastern Virginia.

Chris has established himself as a leading leasing broker in the Hampton Roads market and has been recognized as a top producing broker by the Commercial Real Estate Alliance every year since 2001, winning numerous awards including the Deal of the Year in 2016. Having completed over 1,000 lease transactions of all sizes ranging from $100,000 to $60,000,000, Chris’ clients benefit from significant market knowledge and insight. Chris works with local, regional and institutional landlords providing a client focused approach to leasing and marketing strategy, transaction negotiations and financial analysis. Chris’ relentless drive to provide his clients best in class leasing services has resulted in many long-term client relationships including REITs who have trusted Chris with their portfolios for over 15 years.

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Drew Ott

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Drew holds a Bachelor of Science degree in Marketing, with a concentration in Professional Sales from Virginia Tech. While attending Virginia Tech, Drew was a member of the nationally ranked Men’s soccer team. Originally from the Hampton Roads area -- specifically Virginia Beach -- and a graduate of Norfolk Academy, Drew has a strong understanding of the market in this area. 

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Persifor Frazer

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Executive Vice President and Principal, Perry Frazer has over 22 years of commercial real estate experience. Perry was named the Managing Director of the Hampton Roads office in 2014. As Managing Director, Perry manages all aspects of local business to generate and maintain maximum profitability. The emphasis is on integration of a variety of service lines for new business development and growing market share. Perry guides real estate managers, sales professionals, and the office manager in client relations, service orientation and consulting role as well as the effective and efficient operation of its office and accounts.

He has been a top ten regional producer every year since 2002 and over the past 15 years Perry has leased approximately 20 million square feet in the Hampton Roads market. Perry represents institutional Landlords in the Hampton Roads markets and has established himself as one of the leading office and flex brokers in the region. He has completed numerous large tenant representation assignments over the past five years.
 
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Pat Mugler has over 28 years’ experience in the commercial real estate industry as a broker. As an Executive Vice President and Principal in the Virginia offices, Pat has successfully closed  millions of square feet of lease transactions and participated in numerous institutional and local sales transactions as well. Mr. Mugler has twice been awarded the prestigious “Hunter A. Hogan Award”, for being the region’s highest producing broker.
 
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Gray Randolph

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In 2001, Gray became a member of the prestigious SIOR (Society of Commercial Real Estate Brokers). He has been a top producer in that arena for the past 20 years, and after closing several thousands of transactions in the last 30 years, he has a keen understanding of the complexities of many markets around the United States and Europe.

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Donald Crigger

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Ricky Anderson

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Brian has completed over 100 transactions and has leased/disposed of over 1,000,000 SF of space.

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Brian Davidson

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After graduating from the University of Virginia in 2016, Brian Davidson quickly became an integral part of the brokerage team representing owners and occupiers of office and industrial properties. Since 2016, Brian has negotiated over 400 transactions valued at over $200 million. Clients have included defense contractors, REITS, national corporations, medical practices and local businesses and developers. A lifelong area native, Brian has a wellfounded knowledge of the local market and has relationships with many local firms and business leaders. With support from his entire Colliers team, Brian provides the following services to his clients with a strong emphasis on teamwork, communication, and the highest level of customer service:
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