The Las Vegas Valley is overbuilt in medical offices as demonstrated by the vacancy rate that jumped to 14.2 percent in 2007's fourth quarter, the highest rate since 2000's fourth quarter, according to CB Richard Ellis. The vacancy rate was 10 percent a year ago.

Nearly 1.2 million square feet of empty medical office space can be found in 8.3 million square feet in 210 buildings of 10,000 square feet or more. That's an even bigger hit for developers because their cost is 20 percent higher for medical offices than standard commercial space.

There is no indication the market will improve. Fifty-two thousand square feet of space became vacant in the fourth quarter than came on line. In 2007, 415,000 square feet were completed, and 17 buildings containing 1 million square feet are under construction.

"With the slowdown of homebuilding, the demand for medical offices in the suburban areas has also become soft with significant vacancies beginning to occur," says Craig Shute, managing director of CB Richard Ellis' Las Vegas office.

The highest vacancy rate has been in the southwest valley, which had a staggering rate of 37 percent, up from 14 percent in the second quarter. That's been a hot market for medical offices with the opening of two hospitals, Shute says. About 330,000 square feet were built in the southwest in 2007.

Other parts of the valley have had steady vacancy rates. The southeast had 17.3 percent; central/east, 15.2 percent; and west, 12.6 percent. The northwest and North Las Vegas have the lowest vacancy rates at 7 percent.

Despite the increasing vacancy, Shute says he's optimistic about the market's future. He expects a slowdown in construction in the southwest and west with some projects delaying starts. It's just a matter of time before population growth will spur more demand, he says.

Several national developers are investigating opportunities to build surgery centers.