In this edition of the Dental Real Estate Newsletter, we’re going to take a hard look at the Buckhead Submarket with a particular view on the saturation of medical services in the market.
Those with some knowledge of the market know that Buckhead is one of the city’s more affluent submarkets. The entire submarket contains 21,782,679 rentable square feet and it is dominated by smaller financial services firms and there are very few large tenants compared with other markets.
The last cycle left Buckhead extremely overbuilt with construction of 2 new towers where only 5 had been built in the previous ten years. Vacancy rates which had modulated at 9-13% in the previous five years shot to 21% as these buildings delivered. Asking rents which peaked at $28.69/sf, have slipped and landlords are offering extremely attractive packages to long term credit tenants.
There are one hundred and twelve dentists in Buckhead, 105,948 residents in 2009 and total dental sales for $37.8M. In the Greater Atlanta market as a whole, there are 2,804 dentists and 5.57 million residents. Total dental sales are close to $1.5 billion.
These numbers may reflect some extenuating factors (i.e. many more people seeking care in this market that are not residents, doctors practicing one or two days a week instead of full time, etc.), but when compared against each other, the Greater Atlanta vs. Buckhead comparison is interesting. While sales per dentist were lower ($410K vs. $338K), the average resident seeking care in Buckhead spent 72% more annually than those in the Greater Atlanta market.
Also, there are significant barriers to entry in this market. Many Class A Buildings will not accept a dental user, or will only accept one in the entire building. While office space is plentiful, this established market can sometimes require flexibility to find a workable solution.
In summary, Buckhead is a market that can afford some significant savings in rent and oversized tenant improvement packages. At the same time, a dentist must have a plan to outpace competition if they’re going to access these higher paying patients. Marketing dollars are necessary to startup in this market, but once going, competition is likely in place and not increasing.
If you’ve got interest in this market or another, please contact that author at bcornett@ackermanco.net.
