Rental rates for new de novo ASC space have skyrocketed in recent years, as labor costs, wood and steel prices have all increased through 2023 and into 2024, according to the 2024 "Medical Outpatient Building Outlook" from advisory firm Stout.
Between 2018 and 2019, developers saw a cost increase of 10% to 30% in construction, with an additional 15% to 20% price increase in the last several years.
To make up for raising construction costs, developers are driving up rent costs. Between 2020 and 2021, ASCs were generally priced at $550 per square foot.
Now, new ASCs are generally priced at or above $650 per square foot, an increase of 18.8%. In 2020 and 2021, developer rent yields were generally pricing at 6.75%. Currently developer yields are generally pricing at 7.75%, seeing an approximate 35.7% increase in rents.
Over roughly the same period, reimbursements from CMS have been slightly under 10.0%, according to the report.
New medical outpatient space is generally achieving rental rates ranging from $28 to $35 per square foot, net on a national basis — an approximate $5 to $10 per square foot increase over 2019 levels.