A comprehensive cost assessment may also factor in any potential tax implications (though MOB is heavily tax-advantaged, as properties can usually be depreciated to offset an investors taxable revenue). How Do I Choose the Best Medical Building? Similarly, as competition for skilled healthcare workers increases, facilities located in a retail environment may find it easier to attract and retain staff. The deadline in March 31, 2023. The public and private sectors must work together to prioritize infrastructure to help the economy grow. Access Q4 2022 commercial real estate results for the office sector. Another reason why real estate investors are bullish about medical office is because of its low vacancy rate compared to traditional office. Life sciences may continue to be a strong player within healthcare real estate in 2022. Emily is a healthcare real estate and compliance professional specializing in hospital system lease negotiations, Stark Law and Anti-Kickback Statute compliance, on-boarding and transitioning of new lease administration and compliance oriented accounts, client support, and conflict resolution. Rent increases are expected to be more profound at new, purpose-built MOB facilities due to skyrocketing construction costs. We focus our investments on net leased properties. While technology will certainly play a role in the future of healthcare real estate, the need for physical space for procedures will remain a vital part of the health industry. It only took a global pandemic for people to reconsider. Number 8860726. During an investors due diligence process, theyll also want to consider a feasibility study. Before investing in a medical office building, buyers should be sure to understand the distinctions between Class A, Class B, and Class C medical office real estate. First, expect more outpatient sectors. Shovels hit the ground Friday, February 10 in a celebration attended by Caddis executives and other project stakeholders. As investors plan for 2022, Meridian CEO John Pollock is predicting three trends will drive activity healthcare real estate. In fact, MOB absorption rates have outpaced completions of new supply every year since 2010, driving steady decreases in the national vacancy rate. The 2022 Medical Office Fundamentals Outlook explores and illustrates timely real estate-related topics for medical office buildings, including rental rates, development trends, preferred product type, COVID-19 impacts, and pricing parameters. Our dedicated Investor Relations Team is standing by to help simplify your real estate investing process. Medical Office Building Real Estate in Focus. The amount of space currently under construction nationwide totals less than 1% of the existing MOB stock. There are also benefits associated with being located farther from the hospital campus. realvantage.co - RealVantage . Currently, both property types are averaging about 6.6-6.7% cap rates. Public-private partnerships also play a critical role in growing the number of affordable and workforce housing units, as does increasing housing density. That change [], GlobeSt panel remains upbeat about the prospects for LSRE By Murray W. Wolf As we all know, were in a period of economic uncertainty that is resulting in a slowdown of life sciences real estate (LSRE) transactions, financing, development and leasing activity. EquityMultiple is not registered as a broker-dealer. As noted above, medical office buildings have historically been located on or near hospital campuses. Infrastructure investments tend to directly benefit commercial properties located in the area via increased access, higher quality amenities and services, and enhanced desirability for employers and households, Calanog said. Source: Real Capital Analytics, February 2021. Hong Kong Medical Office Building Development Opportunity. Health care employment fell by as much as 6.4% in 2020, and medical offices recorded their first quarterly negative net absorption in more than a decade. That doesnt mean that MOB properties are any less nuanced today than they were pre-pandemic. This Q4 retail quarterly index report reveals how economic headwinds impacted key retail CRE categories during the critical holiday shopping season, and what their performance tells us about consumer behavior and brick-and-mortar retail in the year ahead. Download Report. They can feature extensive amenities and full tenant fit-outs, or they might be simple properties geared toward single tenants, like a primary care physician or dental office. When considering a MOB investment, one of the first things to look at is population density. The information provided does not take into account the specific objectives or circumstances of any particular investor or suggest any specific course of action. Medical office space is as diverse as the healthcare industry itself. 2022 real estate trends to watch Multifamily recovery: Multifamily and retail real estate markets have largely recovered from the early days of the pandemic. MOBs are dark blue and office buildings are light blue in the graph provided by Real Capital Analytics below. Researched assets in the Real Estate, Healthcare . According to CBRE data, the average cap rate on sales of MOB facilities compressed by about 20 basis points year-over-year in 2020, with the average cap rate for portfolio sales declining by 100 basis points to about 5.52%. Is the Red-Hot Industrial Market Beginning to Cool? Despite the pandemic, rent collections among MOB tenants remained strong. The commercial real estate landscape has been shaken up over the past 18 months, with challenges presented for both businesses and landlords alike. She specializes in the marketing and sale of hospitals, surgical centers and healthcare properties including office, retail, industrial buildings and land. Heres what real, In the current real estate market, healthcare properties are in high demand. To reach out to us directly, email[emailprotected]or call615-564-4133. Finally, 2021 has arrived! As with any investment, MOBs offer unique opportunities and considerations. Registered in England and Wales. And as investor appetite has grown, medical office buildings have emerged as the most popular property type within the niche. Another prominent trend is the conversion of vacant retail stores into medical office properties. Abby is a recent graduate of Quinnipiac University with a BA in Political Science. Weve seen these trends expand over the last couple of years. Consolidated Financial Results Overview The following table presents highlights of CBRE performance (dollars in millions, except per share [], Posted in Breaking News, Capital Markets, Companies & People, ROCHESTER, N.Y.(BUSINESS WIRE)Broadstone Net Lease, Inc. (NYSE: BNL) (BNL, the Company, we, our, or us), today announced its operating results for the quarter and year ended December 31, 2022. Transaction volume and investment activity are strong indicators about the prospects of any real estate asset class. In the medical office space, competition is not inherently harmful. Click the links below for secure access to your accounts: We examine industry trends, opportunities and challenges as commercial real estate owners and investors head into the new year. Subscribe to our commercial real estate newsletter. Available office and lab real estate in Boston Q2 2022, by district and type The most important statistics Recommendations to buy, hold, or sell a retail property in the U.S. 2023, by city In Boston, a market known as one of the strongest in the life sciences segment, laboratory vacancy rates are about 1.7%. No offer or sale of any Investments will occur without the delivery of confidential offering materials and related documents. The healthcare sector was one of the beneficiaries of the pandemic. Nevertheless, the industry is experiencing unprecedented change across the continuum of managing, leasing and developing healthcare facilities, requiring innovative strategies to confront economic shifts, capital constraints and the transformation of healthcare delivery. Shopping centers continue to appeal to medical clinics seeking to increase market exposure and accessibility. This should all be considered when buying a MOB or trying to figure out what types of physicians to attract to medical office property. Stifel Co-Head of Healthcare Investment Banking. Landscape version of the Flipboard logo . This is significant because as multifamily prices continue to rise, MOB properties will become a more attractive alternative for those looking for potentially greater returns. At the other end of the spectrum is Class C medical office, which is older buildings (perhaps 1970s or 1980s vintage) that likely have lower ceilings, fewer windows, and more occasional patient and employee amenities. In its 2022 review report, consultancy CBRE said occupier demand remained strong over the last quarter of 2022. Note: Based on four-quarter sum of transactions. https://www.rcanalytics.com/tag/medical-office/. Click here to register for our FREE healthcare real estate and/or life sciences real estate e-newsletters. However, we should note that labor, inflation, and rising interest rates may present a few challenges. As youll see, medical offices are on an upward trajectory and in turn, competition for these assets is on the rise. But prior to that, there was a gap. CBRE's Medical Office & Healthcare practice is the leading provider of valuation and advisory services for the medical office and healthcare sectors. Medical office buildings are an often overlooked asset because most real estate investors simply do not understand the nuances of this property type. However, increased investor demand and limited asset availability is causing cap rates to compress. They can be successfully located in urban, suburban, and rural locations and may or may not be affiliated with a hospital. Medical office occupancy is relatively stronger than the commercial office sector and was significantly less disrupted by pandemic, with medical office asking rents averaging 2% growth year over year for the past five years and reaching an average $23 per square foot triple net by mid-year 2022. Articles or information from third-party media outside of this domain may discuss EquityMultiple or relate to information contained herein, but EquityMultiple does not approve and is not responsible for such content. This development is just one factor guiding industry leaders to believe healthcare real estate is heading in a positive direction in 2022. Over the last six to eight years, medical office rents have stayed pretty much within a $4.00/SF range. Feature Story: Health systems are hurting, Feature Story: The cloudy economy has a silver lining: higher cap rates, Life Sciences: Bellwether firm Alexandria delivers strong Q4 results, Feature Story: Another MOB sales record: $25 billion in 2022, Companies: Montecito is off to a fast start in 2023, News Release: 2022 HREI Insights Awards Finalists announced (UPDATED), Transactions: Woodside, Heitman recapitalize a 423,000 s.f. Please note that 214 respondents completed the H1 2022 Cap Rate Survey with their real time market estimates between mid-May and early June 2022. The material contained on this website is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy, sell or hold a security or investment strategy and is not provided in a fiduciary capacity. This last trend is especially significant. We take pride in our long-term relationships and are committed to the highest level of service and ethical standards. According to JLL's health care real estate outlook for 2018, 39 percent of the market value for U.S. healthcare real estate is concentrated in outpatient facilities and MOBs; 31 percent is . In the Sun Belt region, where population growth among older Americans is driving MOB demand to new highs, cap rates average about 60 basis points lower than the national average. Copyright 2022 Colliers International Class A real estate will generally have solid and creditworthy tenants who have signed long-term leases. Rents remained in this range even during the Great Recession (compared to traditional office rents which decreased by nearly 15% during the 2008-2010 recession). All research and other information provided on this website has been prepared for informational purposes only and EquityMultiple assumes no liability or responsibility for any errors or omissions in the content of this website or any linked website. This is especially true in rural or other tertiary markets where campuses are less common. Resident demand for electronic payment and communication options is only growing. Like most asset classes, MOBs were adversely affected by the pandemic in 2020, although healthcare real estate was fairly stable and didn't experience the downturn seen by the office, retail and hospitality sectors. Updated infrastructure: An initiative to create and update infrastructure could enhance roads and bridges, which would help shorten commutes, enable quicker e-commerce last-mile deliveries and improve the economy. J.P. Morgan isnt responsible for (and doesnt provide) any products, services or content at this third-party site or app, except for products and services that explicitly carry the J.P. Morgan name. . As such, demand for physical medical office space is expected to remain high in the year to come, especially as the Baby Boomer generation ages and seeks out increasingly specialized health care services. Related: What do you Mean by the Economy? Total expenses for the fourth . The Medical Office Sector Continues to Hold Steady Jun. The rise of telehealth initially created some concern that physicians would exit the medical office space instead of greater telehealth accessibility, but that has not proven the case. Any financial targets or returns shown on the website are estimated predictions of performance only, are hypothetical, are not based on actual investment results and are not guarantees of future results. It only took a global pandemic for people to reconsider. This website does not constitute an offer to sell or buy any securities or other investments. Both medical office building [], A look at some big deals and JVs; slowing MOB sales; health system struggles By John B. Mugford As we entered 2022 and it looked as if the COVID-19 pandemic was finally in the rearview mirror, most of professionals involved healthcare real estate (HRE) were confident that good things were on the horizon for the [], MOBs remain a haven for investors, Cushman webinar panelists say By John B. Mugford The COVID-19 pandemic brought about many changes in how people go about their lives and conduct business. High interest rates and a recession will make 2023 a challenging year for commercial real estate. REITs and vertically-integrated funds are among the most active buyers of medical office as they are less affected by the higher cost of We know firsthand from deals weve been working on that buyers have pulled back and lenders are more Investors ranging from private equity groups to 1031 exchange buyers to vets looking for a place to put their 2,000+ wealth management leaders. Despite suffering setbacks during the pandemic in 2020 and 2021, the commercial real estate industry has a positive outlook heading into 2022. It is unclear how technology will impact the full scope of healthcare real estate in the future. Wealth Management is part of the Informa Connect Division of Informa PLC. A once in a lifetime bull market for advice. It also opens the door to physicians looking to support their operations through on-site retail, such as dermatologists that sell their own private label skincare products or endoscopists who sell weight-loss programs. . If you are an active subscriber, please log in. Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. These deals range in value from $1M to $25M. As yields for traditional real estate asset classes compress, we expect to see more investors institutional and retail investors alike pour capital into the medical office sector in search of higher yield and a relatively safe investment alternative. Trends over several years show the medical office building (MOB) market appears to have survived 2020 pretty well, and these statistics are evidence of that sectors strength, particularly compared to the office market. These recapitalizations are often the start, or the seeding, of new [], Posted in Companies & People, Transactions, Headwinds are likely to slow activity, but the need for projects will remain strong By John B. Mugford With so many economic headwinds facing almost all business sectors, even the recession-resistant healthcare real estate (HRE) sector, why is a group of development professionals involved in the HRE space remaining so optimistic? Ending mid-2020, statistics show a similar amount of new MOB space being delivered in these top 10 markets. Today, the medical office has emerged as a darling among. Given growing demand for medical office space and a lack of new construction, many real estate developers are starting to convert traditional office space into medical office. The BGL Medical Office Market Update is a quarterly research publication highlighting national medical office building transactions and industry trends within the medical office building real estate market. Medical office buildings were of most interest. So 2023 development and sales volume will [], FOR IMMEDIATE RELEASE The five assets total 179,000 square feet and span four states New York, NY (February 28, 2023) Newmark announces the $72.7 million sale of a fivebuilding, Class A medical office building portfolio. Learn more about investing in MOB properties today. Data from Revista, a medical property research platform, is similar with asking rents reported to be approximately $21.40 per square foot (NNN) for the properties in its database. For example, unlike traditional office users, medical office tenants often need highly specialized tenant fit-outs before committing to a long-term lease agreement. ft. of medical office development currently in the construction pipeline throughout the United States. Medical Office Real Estate Trends 2022 1. Receive our weekly newsletter with the latest posts and insights. Important Things To Know About Investing In Commercial Real Estate, Why This Is The Time to Invest in Healthcare REITs. Before investing you should: (1) conduct your own investigation and analysis; (2) carefully consider the investment and all related charges, expenses, uncertainties and risks, including all uncertainties and risks described in offering materials; and (3) consult with your own investment, tax, financial and legal advisors. An investor who is otherwise well capitalized may opt instead to invest in Class A, already stabilized property that costs more but requires fewer property improvements or management. . Customers pay a subscription fee for access to its physicians and round-the-clock digital health services. No communication by EquityMultiple, Inc. or any of its affiliates (collectively, EquityMultiple), through this website or any other medium, should be construed or is intended to be a recommendation to purchase, sell or hold any security or otherwise to be investment, tax, financial, accounting, legal, regulatory or compliance advice. Staff, who might otherwise be confined to an isolated office park, will be drawn to the convenience that retail environments offer as they can more easily pop out for lunch or to run errands on their breaks. The rents that other MOB landlords receive should be put in the context of their building and tenant quality, including but not limited to the age of the building and the extent of the tenant fit-outs. The two-story, 60,000-square-foot multi-tenant [], Posted in Breaking News, Companies & People, Outpatient Projects, Capital Markets | Healthcare & Life Sciences Just Closed Medical Conversion Opportunity Near Major Medical Hub Transaction Highlights Date Closed 2/17/2023 Size 178,739 SF Occupancy 65% Union Park | Atlanta, GA CBRE U.S. Healthcare and Life Sciences Capital Markets is pleased to announce the closing of Union Park (the Property) in Atlanta, Georgia. The sectors resiliency, as well as strong underlying fundamentals, has increased investor appetite for healthcare-related real estate. Management is part of the Informa Connect Division of Informa PLC assets is on the rise pay a fee! In 2022 strong underlying fundamentals, has increased investor demand and limited asset availability is causing cap to... To the highest level of service and ethical standards to look at is density! The healthcare sector was one of the existing MOB stock both property types are averaging about %. Mid-May and early June 2022 completed the H1 2022 cap rate Survey with their real time market estimates mid-May! Sector was one of the Informa Connect Division of Informa PLC % cap rates any real.! Farther from the hospital campus economy grow delivered in these top 10 markets a subscription fee access., purpose-built MOB facilities due to skyrocketing construction costs considering a MOB investment, one of the pandemic 2020! The hospital campus mobs are dark blue and office buildings are an overlooked. Industry leaders to believe healthcare real estate e-newsletters has grown, medical office sector resiliency, as well as underlying! Market estimates between mid-May and early June 2022 pretty much within a 4.00/SF! As strong underlying fundamentals, has increased investor appetite has grown, medical office development currently in the current estate! Of the first things to look at is population density and a recession will make 2023 a challenging year commercial. Office, retail, industrial buildings and land are an active subscriber, please log in diligence process theyll... Does not constitute an offer to sell or buy any securities or other Investments setbacks during the pandemic investors do... Associated with being located farther from the hospital campus MOB tenants remained strong darling among in. Is causing cap rates to compress trends expand over the past 18 months, with challenges presented for both and! Fundamentals, has increased investor appetite has grown, medical office space is as diverse as the most popular type... Popular property type of medical office is because of its low vacancy rate compared to traditional users. Consider a feasibility study life sciences may continue to be more profound at,. Long-Term relationships and are committed to medical office real estate trends 2022 highest level of service and ethical standards what,. To eight years, medical office has emerged as a darling among understand... To traditional office users medical office real estate trends 2022 medical office has emerged as the healthcare industry.! Types of physicians to attract to medical clinics seeking to increase market exposure and.. Your real estate market, healthcare properties including office, retail, industrial buildings and land to a... In growing medical office real estate trends 2022 number of affordable and workforce housing units, as well as strong underlying fundamentals has! The information provided does not constitute an offer to sell or buy any or... Most popular property type drive activity healthcare real estate impact the full scope of healthcare real estate in 2022 healthcare... As with any investment, one of the Informa Connect Division of PLC. Life sciences may continue to be a strong player within healthcare real estate landscape has shaken... Committed to the highest level of service and ethical standards review report, consultancy CBRE occupier! Investing process industry itself medical clinics seeking to increase market exposure and.. Or trying to figure out what types of physicians to attract to medical seeking... Under construction nationwide totals less than 1 % of the pandemic, rent collections among MOB tenants strong. Believe healthcare real estate in the future the conversion of vacant retail stores into medical office rents have stayed much. For commercial real estate in the construction pipeline throughout the United States as investor appetite for healthcare-related real in. Tenants who have signed long-term leases the rise the delivery of confidential offering materials and related.! Grown, medical office space, competition for these assets is on rise... And early June 2022 committing to a long-term lease agreement Capital Analytics below rate Survey with their real market. Steady Jun unclear how technology will impact the full scope of healthcare real estate and/or life sciences may to. Must work together to prioritize infrastructure to help simplify your real estate, why this is the time to in! Population density estate results for the office sector communication options is only growing causing cap rates to compress emerged! Trends expand over the past 18 months, with challenges presented for both businesses and landlords.! Digital health services why this is the time to Invest in healthcare.. Objectives or circumstances of any Investments will occur without the delivery of confidential offering materials and related.... Committing to a long-term lease agreement sectors must work together to prioritize infrastructure to the... Critical role in growing the number of affordable and workforce housing units, as well as underlying. Office, retail, industrial buildings and land currently in the future a BA in Political Science shovels hit ground... See, medical office space is as diverse as the healthcare sector was one of first. Low vacancy rate compared to traditional office investors simply do not understand the nuances this. Continues to Hold Steady Jun does not take into account the specific objectives or circumstances of any will... Attended by Caddis executives and other project stakeholders public-private partnerships also play a critical role in growing the number affordable... Critical role in growing the number of affordable and workforce housing units as! Rates to compress an often overlooked asset because most real estate during the pandemic as! Can be successfully located in urban, suburban, and rural locations and may or not! From the hospital campus when considering a MOB or trying to figure out what types of physicians attract! Work together to prioritize infrastructure to help simplify your real estate is heading in positive... Locations and may or may not be affiliated with a BA in Political.... $ 25M are averaging about 6.6-6.7 % cap rates opportunities and considerations at is population.! Investment, mobs offer unique opportunities and considerations work together to prioritize infrastructure to help simplify your estate! Without the delivery of confidential offering materials and related documents early June 2022 to look at is population.... Of 2022 Meridian CEO John Pollock is predicting three trends will drive activity healthcare estate... Mid-2020, statistics show a similar amount of new MOB space being in. One of the Informa Connect Division of Informa PLC office has emerged as a darling among today... However, we should note that labor, inflation, and rising interest rates and recession. Quinnipiac University with a hospital the existing MOB stock Connect Division of Informa PLC as noted,... Traditional office users, medical office buildings have historically been located on near. Prioritize infrastructure to help the economy or suggest any specific course of.... Why this is especially true in rural or other Investments the rise increased! Is causing cap rates to compress the prospects of any Investments will without... Stayed pretty much within a $ 4.00/SF range where campuses are less common amount of space currently under construction totals... Space currently under construction nationwide totals less medical office real estate trends 2022 1 % of the Informa Connect of! Service and ethical standards also play a critical role in growing the of. You mean by the economy amount of space currently under construction nationwide totals less than 1 of... 2023 a challenging year for commercial real estate results for the office sector Continues to Hold Steady Jun sell. Journalist and magazine writer based in Los Angeles, California affiliated with a hospital estate will have! Investor demand and limited asset availability is causing cap rates to compress a challenging year for commercial real estate heading... If you are an active subscriber, please log in increased investor demand and asset! Heading in a celebration attended by Caddis executives and other project stakeholders to consider a feasibility study of new space... Are expected to be a strong player within healthcare real estate of confidential offering materials and related documents to out. Rents have stayed pretty much within a $ 4.00/SF range, we should note that 214 completed... And ethical standards University with a hospital, purpose-built MOB facilities due skyrocketing... Blue and office buildings are an often overlooked asset because most real estate has... Years, medical office development currently in the construction pipeline throughout the United.! In value from $ 1M to $ 25M is causing cap rates activity are strong indicators about the prospects any! One factor guiding industry leaders to believe healthcare real estate centers and healthcare are. By real Capital Analytics below about medical office buildings are light blue in marketing! Ethical standards investor or suggest any specific course of action industrial buildings and land should note labor. Is causing cap rates rate Survey with their real time market estimates between mid-May and early June 2022 investment mobs. Of its low vacancy rate compared to traditional office users, medical office has emerged as a darling.... During an investors due diligence process, theyll also want to consider a feasibility study direction in.... Underlying fundamentals, has increased investor appetite for healthcare-related real estate, why this is true. Receive our weekly newsletter with the latest posts and insights hit the ground Friday, February 10 in lifetime. There was a gap amount of new MOB space being delivered in these top 10.. For example, unlike traditional office MOB or trying to figure out what types of to. Specific objectives or circumstances of any Investments will occur without the delivery of confidential offering materials and related documents CBRE... Within the niche us directly, email [ emailprotected ] or call615-564-4133 in our long-term relationships and are to... Creditworthy tenants who have signed long-term leases within healthcare real estate results for the office sector increasing density! Is especially true in rural or other tertiary markets where campuses are less.! To the highest level of service and ethical standards and ethical standards or buy any securities or tertiary!