GPs working out of new medical facilities near Perth's hospitals could be paying rent as high as a premium grade office block in the CBD, according to new analysis by Perth business intelligence company Y Research.
The group looked at medical property as an emerging asset class in Perth's property market, and found strong growth in both demand and price for buildings that house medical facilities across the city, especially if they are close to a hospital.
Using information from its office market databases, Y Research determined the amount of office space occupied by medical users in suburbs surrounding Perth's hospitals, then rated them against the number of hospital beds in Perth's major hospitals to come up with each suburb's "Medical Multiplier Effect" – the impact of each hospital on the surrounding suburbs' office markets.
The measure found on average for each of the 5,316 hospital beds in Perth's major hospitals, approximately 19.7 square metres of office space was occupied by medical space users in surrounding suburbs.
The largest impact was in the Perth CBD and West Perth where 55.6 square metres of office space is occupied by medical users, with Nedlands and Fremantle the next strongest suburbs, each recording 24.1 square metres of space occupied by medical users per hospital bed.
Demand was weakest in Joondalup, where just 5.6 square metres of office space was occupied by medical space users, and in Claremont only 9.1 square metres of office space occupied, was the only other suburb to record less than 10 square metres of medical-led demand.
Y Research's principal and chief problem solver Damian Stone said WA's ageing population, strong employment growth and the flow of private investment to build new care facilities is turning medical into a major asset class.
"The health sector's strong performance is underpinned by the rental premium of medical centres compared to alternative options for medical tenants – office, retail and former residential properties. Current asking rents for new medical centres on hospital campuses are comparable to premium grade CBD office buildings," Mr Stone said.
"On average, asking rents for high quality medical centres are 88 per cent higher than office and retail properties advertised for medical use and 50.7 per cent higher than former residential properties advertised for medical use.
"Given the expected demand for medical facilities as the population ages, and with strong investment from the government, private sector and property industry, medical property has the potential to be the prescription for the ailments of Western Australia's commercial property markets in the years ahead."
The state government has committed to building a number of 'medihotels' in Perth, which would provide accommodation support for patients not ready to be discharged but who no longer need a hospital bed.
The tender to build the first such facility was won by the Fini Group who are due to start work next year and finish by 2021. The project will also include apartments, an aged care facility and a medical clinic adjacent to Perth's Fiona Stanley Hospital and St John of God private hospital.
And Mr Stone said there are more health facilities on the way for WA's multi-billion-dollar medical sector.
"Nationally significant investment is flowing into the healthcare sector, which is estimated to be worth over $120 billion dollars," he said.
"A-REIT Dexus just announced a $750 million Heath Care Property Fund. Superfund Australian Unity raised over $170 million in two days for its Health Care Property Fund.
"In Perth, St John of God recently announced plans to divest a $400 million portfolio of properties under a sale and lease back arrangement.
"Health care is an attractive sector for investors due to strong returns and low volatility compared to office and retail property. Nationally, health care property delivered an annual return over 20 per cent. As a result of competition for limited quality assets, yields are tightening to levels comparable to quality office and retail assets."