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Pending health plan stalls professional space sales.

The Manhattan professional real estate market is experiencing a temporary slowdown in the volume of professional transactions. Many physicians have put their plans on hold to relocate or purchase offices as they await the imminent changes in the health care industry from Washington.

Many of New York City's, as well as the nation's medical professionals, are anxiously awaiting the Clinton Administration's new health plan. The fear of the unknown has sent shock waves throughout the health care industry.

This has in turn had a negative effect on the professional real estate market. Many doctors who would have otherwise considered purchasing an office have decided to remain in their present space, or are pursuing the opportunities available within the leasing market, as they wait cautiously for Washington.

One major advantage of leasing an office is that it requires much less upfront capital. Moreover, landlords are being much more flexible in negotiating lease terms. Many landlords are building offices to suit the tenant's requirements or are providing substantial rent concessions toward the construction costs.

A popular trend found among medical professionals in today's market is doctors grouping together. Joining forces with other doctors may be the preferred method for physicians seeking to keep their overhead low. Not only can they share expensive medical and office equipment and staff, but also a shared waiting and reception areas helps reduce each doctor's space requirements. Leasing may also be the preferred method for a group practice since lease arrangements generally provide more flexibility for accommodating retirements or dissolutions of groups.

Although the option to leasing may be appealing to many physicians concerned with keeping their overhead low, there is a shortage of available space for lease. The sought after locations encompassing Fifth to Lexington Avenues between 60th and 96th Streets are not able to keep up with the steady demand for professional office space, because a majority of these ground floor offices were sold by co-op corporations in the 1970's and 1980's, to individual physicians. These individual owners are generally prohibited by the co-op corporations' proprietary lease to sublet the entire offices.

Offices under 900 square feet are especially being affected due to the many doctors who have chosen to group together. These smaller single-doctor offices are not as attractive to doctors who are so focused on keeping their expenses at a minimum.

It is no secret that the forthcoming health care reforms will not only affect the people who work directly in the health care industry, but other industries and professions as well. The fear that has been felt among doctors, hospitals and pharmaceutical companies has already had a trickle-down effect into other supporting industries.

The professional real estate market has been especially affected by Washington's closed door policy regarding the new health care program. Many sellers are dropping prices to unheard of numbers, fearing the worst is coming.

As the Clinton Administration unfolds its health care program, medical professionals will be aware of what is to come and will be then able to act accordingly. We predict that once it is known how health care will be changed,

many new opportunities will develop, as many of these individual physicians who have waited on the side lines, will take action.
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Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Mid-Year Review & Forecast, Section II; medical professionals display anxious anticipation of President Bill Clinton's healthcare plan
Author:Wexler, Paul
Publication:Real Estate Weekly
Article Type:Column
Date:Jun 23, 1993
Previous Article:In leasing market, worst is over in Midtown.
Next Article:Is your building sick?

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