Many medical practices are going condo

As the popularity of office condominiums grew, physicians started to see the potential. Now, office condos are being built specifically with physician tenants in mind.

By Pamela Lewis Dolan, AMNews staff. Dec. 4, 2006.

By the time Stephen Kundell, MD, learned of a real estate option geared toward doctors in private practice, he already had paid out more than $250,000 in rent and spent thousands more in upgrades to his office space that netted nothing in return.

But Dr. Kundell didn't want to buy a building. So the pediatrician from Thousand Oaks, Calif., did what physicians around the country in a similar situation are doing -- he invested in a medical condominium.

In general, office condominiums aren't a new concept. But a few years ago, when rent prices saw a dramatic increase and property costs soared out of reach for many physicians, more of them started to see the investment potential of office condos. It was an opportunity to earn equity, manage your own space, share construction costs with others and possibly qualify for small business loans. And buying a condo was a lot less expensive than buying a building.

Now medical office condos are being constructed in most major markets around the country. Even though the residential real estate market in most of the country has flatlined or declined in recent months, construction of medical office condos hasn't slowed, real estate experts say.

The medical condo market is so new that no one has researched it specifically. But according to Bob Bach, a researcher with the national real estate firm of Grub and Ellis, the office condo market in general is booming. Plus, he said, the success of new, larger medical facilities, such as hospitals, is partly reliant on neighboring medical condos. While many of those nearby condos were needed initially to house specialized technologies, Bach said, doctors found that they also could benefit by setting up their practices close to a hospital.