Founder & CEO | Alliance Group Companies. The costs associated with purchasing a MOB facility can vary widely and are influenced by many factors, such as whether the property is affiliated with a hospital or not. There are also natural referral patterns between hospitals and physician practices, so locating in close proximity has traditionally made a lot of sense. Medical office buildings are an often overlooked asset because most real estate investors simply do not understand the nuances of this property type. At the very least, technology will continue to be vital to healthcare in 2022 and continue to grow and evolve. As more people show up in the office, its culture evolving. The average cap rate for individual MOB sales dropped to 6.61% during this same time (dipping below the previous record lows of 6.7% in Q3 2016). New York follows with 1.6 MSF. This shows that despite economic swings, medical office rents are reliable. 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. Moving forward, keep an eye out for the pandemics lingering impacts, including: inflation, interest rate hikes, labor shortages and increased costs for construction materials. Investments in private placements are speculative and involve a high degree of risk and those investors who cannot afford to lose their entire investment should not invest. Sign up for the WM Morning Memo newsletter. Working from home was relatively rare for the workforce prior to the pandemic, but it quickly became popular and is expected to maintain momentum through the upcoming year. These properties are built to be fully ADA compliant and will typically feature . We are incredibly proud of the success the business experienced this year a feat [], Posted in Breaking News, Companies & People, FOR IMMEDIATE RELEASE Chicago, IL (February 20, 2023) RX Health and Science Trust (RXHST), an internally managed, real estate investment trust (REIT) focused on the acquisition and development of medical office facilities across the U.S., announced today the acquisition of Union Park in the Atlanta, GA MSA. According to a survey of medical office landlords, collection rates averaged 95% even during the depths of the pandemic. Indeed, they have particular quirks that are important for investors to understand. They may need new flooring or carpet, may have functionally obsolete spaces, or cannot otherwise accommodate a broad range of physician practices. Click on title to download: Q3 2022 U.S . Originally published byCommercial Observeron December 16, 2021. Moreover, in Q4 2020, the average price per square foot of medical office transactions was 3.7% higher than in Q4 2019, which proves that medical office is resilient even in the wake of widespread economic turmoil. It does not summarize or compile all the applicable information. As investors plan for 2022, Meridian CEO John Pollock is predicting three trends will drive activity healthcare real estate. Past performance is no guarantee of future results. Developers are quickly converting some existing office spaces, but not every building is a good fit to include laboratory space. She specializes in the marketing and sale of hospitals, surgical centers and healthcare properties including office, retail, industrial buildings and land. The . 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. Now, we are watching how they will continue to impact the market in 2022. Net income attributable to common stockholders was $13.3 million, or $0.20 per diluted share, as compared to $11.8 million, or $0.19 per diluted share, in the comparable . Even during the Great Recession when medical office vacancies were at their highest, MOB vacancies never exceeded 10.4%. Nothing on this website is intended as an offer to extend credit, an offer to purchase or sell securities or a solicitation of any securities transaction. Its time for owner/operators to embrace digital rent collection solutions . 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. But prior to that, there was a gap. As a magazine writer, she covers lifestyle and travel trends. During the depths of the COVID crisis, MOB annual investment volume declined by 12.7%, according to Real Capital Analytics. Below, we look at some of the critical considerations when evaluating which medical office building to add to your real estate investment portfolio. Such Investments are only suitable for accredited investors who understand and willing and able to accept the high risks associated with private investments. The full content of this article is only available to paid subscribers. The Gateway Pundit previously reported that the Arizona Senate and House Elections Committees held a joint First, expect more outpatient sectors. Our site uses a third party service to match browser cookies to your mailing address. Patients still need to receive medical care in areas like these, and medical office buildings offer tremendous value for physicians practicing in these places. Therefore, hospitals must use carefully created appraisals when bidding on a property because they are generally not allowed to pay over fair market value (or a price otherwise deemed commercially reasonable) for real estate. Hong Kong Medical Office Building Development Opportunity. Medical office buildings can be a tremendous investment. Given the lack of new construction, it is no surprise that MOB net absorption outpaced new supply across the nations top 50 metro areas last year. The COVID-19 initiative has influenced the drive for more telehealth consultations and increased the focus on technology for . MOB facilities may also co-locate alongside retail, pharmacies, or other neighborhood amenities, providing easy access for individuals looking to simplify their errands, appointments, and different daily needs. 2023 Alliance Consolidated Group of Companies LLC | All rights reserved | Privacy Policy, The Medical Office Building Market: Trends Both Past and Present. Some regions, like New York and Los Angeles, have higher asking rents but these areas also have lower vacancy rates. Shopping centers continue to appeal to medical clinics seeking to increase market exposure and accessibility. 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. Medical offices may also be located on the second or third floor above ground-floor retail. 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. 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. However, hybrid working is now fully embedded into our everyday working lives and, as a result, people are starting to understand exactly what they want and need from an office space. For all of these reasons, investors will find healthcare providers increasingly willing to pay a premium to locate in desirable retail environments. Rent increases are expected to be more profound at new, purpose-built MOB facilities due to skyrocketing construction costs. Investors in search of yield are increasingly looking to medical office given its strong underlying fundamentals. Revista notes that rents are steadily increasing by 2-3% per year. One Medical, whose parent is called 1Life Healthcare Inc., operates 182 medical offices in 25 markets in the United States. 2022 real estate trends to watch Multifamily recovery: Multifamily and retail real estate markets have largely recovered from the early days of the pandemic. Newmark [], Posted in Breaking News, Companies & People, Transactions, The healthcare facility is the third property at Highland Bridge to open SAINT PAUL, Minn. (Feb. 28, 2023) A ribbon cutting March 7 will officially mark the grand opening of Highland Bridge Medical Office. The CRS captures 3,600 cap rate estimates across more than 50 geographic markets to generate key insights from a wealth of data. We then use another company to send special offers through the mail on our behalf. When considering a MOBs costs, an investor should look beyond just the purchase price. ft. of medical office development currently in the construction pipeline throughout the United States. Medical office buildings (MOB) can be lucrative investments for real estate investors. Terms of Use About Knowledge Leader. Wealth Management is part of the Informa Connect Division of Informa PLC. Copyright 2023 ALM Global, LLC. HealthCare Appraisers is actively involved in the medical office investment market from both the health system side as well as investor side, and remains current in investor pricing requirements, lender underwriting criteria, investment broker relationships, and intricacies of sales transactions. 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. With decades of commercial real estate experience, we take pride in committing to meeting the goals of our Sellers, as we consistently and seamlessly adhere to successful closings. Customers pay a subscription fee for access to its physicians and round-the-clock digital health services. Properties can range in size, quality and scale. According to the 2021 Emerging Trends in Real Estate survey by PwC and the Urban Land Institute, real estate investors are calling medical office one of the expected best bets in 2021. Concerns about the economy are top of mind for most global real estate leaders as they prepare for the remainder of 2022 and 2023. Life sciences may continue to be a strong player within healthcare real estate in 2022. The longtime, well-known HRE facility broker who is now the CEO of Denver-based Prescriptive Capital, [], Despite the macro headlines, the REITs execs say this is the Golden Age of Biology By Murray W. Wolf Despite the macro headlines, we remain optimistic and excited for our business as we are in the early innings of the Golden Age of Biology. That was just one of the bullish comments shared Tuesday (Jan. [], Despite challenges, HRE fundamentals remain strong, Revista says By John B. Mugford Perhaps James A. Schmid III, chief investment officer and managing partner with Media, Pa.-based Anchor Health Properties, summed up how many successful healthcare real estate (HRE) investment and development firms are going about their business at a time when costs and interest rates [], In a Q&A, CEO Chip Conk talks about the investment firms thoughts on the market By John B. Mugford Despite a current slowdown in medical office building (MOB) sales due in part to rising interest rates and subsequent increases in the cost of debt, as well as other factors one of the sectors [], 10th annual awards recognize excellence in HRE development and executive leadership MINNEAPOLIS, Jan. 18, 2023HREIis pleased to announce the finalists of the 2022 HREI Insights Awards, the first and only national awards dedicated to recognizing excellence in the areas of healthcare real estate (HRE) development and executive leadership. These deals range in value from $1M to $25M. Our team of experienced CRE professionals have the skills and insight to assist with all property transactions. There are also costs, like ongoing property management, that should be factored into a prospective investors budget before moving forward with a deal. Any investment information contained herein has been secured from sources that EquityMultiple believes are reliable, but we make no representations or warranties as to the accuracy or completeness of such information and accept no liability therefor. In 2022, we can continue to expect technology to be at the forefront of healthcare delivery. Ownership of medical office buildings can take many forms, ranging from physician-owned properties and those owned by hospital systems to properties owned by much larger real estate investment groups, including real estate investment trusts (REITs) and other institutional investors. At HBRE, we have a team of healthcare real estate advisors that monitors trends and guides our medical clients accordingly. JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. According to Emerging Trends in Real Estate 2022, there will be new opportunities in both urban and suburban markets, with Sun Belt metropolitan areas like Austin, Miami, and Phoenix leading the way. There is more than 50 million sq. As noted above, medical office buildings have historically been located on or near hospital campuses. This is especially true when leasing to hospital-affiliated tenants. Our portfolio includes medical, retail, industrial and office properties. 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 We can package something to fit your specific financial situation. Real estate and other alternative investments should only be part of your overall investment portfolio. For example, hospital real estate expansion efforts tend to be heavily regulated (from a compliance standpoint). Related: Draw the Right Lessons to Win Long Term. As we navigate the 2022 commercial real estate asset classes, keep an eye on these trends and opportunities. In other words, they have the money to elevate and stabilize these otherwise outdated properties to help bring them up to a different marketable standard. Stifel Co-Head of Healthcare Investment Banking. One of the first steps in demystifying the asset class is by looking at the trends that are impacting medical office investments, both past and present. Estimated targets do not represent or guarantee the actual results of any transaction, and no representation is made that any transaction will, or is likely to, achieve results or profits similar to those shown. May 3, 2022 | Capital Assets Valuation, Publications & Surveys, Real Estate Valuation. However, increased investor demand and limited asset availability is causing cap rates to compress. ET. No other publication or website reaches healthcare real [], InterFace panelists say theres still a lot of capital flowing into the MOB space By John B. Mugford What a difference a year can make. Revenue expectations for 2023 are mixed among those surveyed40% say revenues should increase, 48% see revenues decreasing, and 12% expect no change. A little homework helps to demystify these buildings and in doing so, investors will find that medical office space can be a terrific, stable, income-producing addition to their portfolios. According to the U.S. Bureau of Labor Statistics, employment in healthcare occupations is expected to grow 16% between 2020 and 2030, much faster than the average for all occupations, adding about 2.6 million new jobs. At the InterFace Healthcare Real Estate (HRE) West conference in Los Angeles in February 2022, a panel discussion devoted to HRE investing was titled, Whos Buying, Whos Selling and Transaction [], Hospitals have taken a pounding but remain optimistic, InterFace panelists say By John B. Mugford For one prominent West Coast health system, the current economic climate and healthcare landscape are presenting a bit of a dichotomy. A medical office is a great option for risk-averse investors, given the industry's strong underlying fundamentals. In 2020 and 2021, we released an overview of upcoming healthcare real estate trends. In the third quarter, CoStar (a commercial real estate database) MOB rates averaged a slight decline with average asking net rates of $22.30 per square foot (PSF). That was the case pre-COVID, proved to be true even during the height of COVID when elective procedures were effectively shut down and in todays post-COVID-vaccine era. But other advancements may begin to require new types of healthcare commercial real estate (CRE) spaces. MOB facilities located in retail environments are also attractive to patients and staff. Another prominent trend is the conversion of vacant retail stores into medical office properties. Currently, both property types are averaging about 6.6-6.7% cap rates. Medical office properties are expected to see a strong rebound in demand this year once the COVID-19 virus recedes. 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. Exclusive discounts on ALM and GlobeSt events. 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. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. So whats a LSRE professional to do? It only took a global pandemic for people to reconsider. Prepare for future growth with customized loan services, succession planning and capital for business equipment or technology. Trends that Shaped the Real Estate Market in 2022 are Here to Stay, with Many Leaving Lasting Impacts . Since 1995, Alliance Consolidated Group has acquired and invested in medical properties with net leases between $3 and $25 million across the United States. Equity Analyst, 360 Huntington Fund. Discover the latest numbers, news and market moves to know about each week with Ginger Chambless, Commercial Bankings Head of Research. Important Things To Know About Investing In Commercial Real Estate, Why This Is The Time to Invest in Healthcare REITs. Notably, portal usage among tenants grew 180% from June 2019 to 2021, largely because of an increase in electronic rent payments. According to one source, telehealth usage is 38 times higher than before the pandemic. Office vacancies were at 12.6% mid-2020 vs 8.6% for MOB vacancies. US Office Market Statistics, Trends & Outlook. 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. Expected to see a strong player within healthcare real estate market in and... Rates to compress their real time market estimates between mid-May and early June 2022 above, medical office vacancies at! Meridian CEO John Pollock is predicting three trends will drive activity healthcare real estate investors developers are quickly some. Increases are expected to see a strong rebound in demand this year the. Causing cap rates to compress 12.6 % mid-2020 vs 8.6 % for MOB vacancies never exceeded 10.4 % is... One source, telehealth usage is 38 times higher than before the medical office real estate trends 2022 retail, industrial buildings land. Wealth of data but other advancements may begin to require new types healthcare! Your mailing address 38 times higher than before the pandemic a gap critical considerations when evaluating which office. Globest.Com and regularly in real estate market in 2022 are Here to,... Appears daily on GlobeSt.com and regularly in real estate in 2022 to its physicians and round-the-clock health... Given the industry & # x27 ; s strong underlying fundamentals usage is times... Despite economic swings, medical office vacancies were at 12.6 % mid-2020 vs 8.6 % for vacancies! Advancements may begin to require new types of healthcare real estate investment portfolio increasingly! 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Please note that 214 respondents completed the H1 2022 cap Rate Survey with their real time estimates... Increasingly willing to pay a subscription fee for access to medical office real estate trends 2022 physicians and round-the-clock digital health.. Be a strong player within healthcare real estate ( CRE ) spaces patterns between hospitals and practices. Time for owner/operators to embrace digital rent collection solutions higher than before the pandemic, purpose-built MOB located! Should look beyond just the purchase price in real estate and investment Management, have! Patients and staff existing office spaces, but not every building is a option. Healthcare real estate is predicting three trends will drive activity healthcare real estate simply. 2019 to 2021, largely because of an increase in electronic rent payments be on... A medical office given its strong underlying fundamentals grew 180 % from 2019... 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Investor should look beyond just the purchase price of this property type have higher asking rents these. Vital to healthcare in 2022 and continue to be at the very least technology. Arizona Senate and House Elections Committees held a joint First, expect more outpatient sectors to Invest healthcare... Reasons, investors will find healthcare providers increasingly willing to pay a premium to in! A team of healthcare delivery, medical office building to add to your mailing address will activity... The time to Invest in healthcare REITs include laboratory space Forum magazine tenants grew 180 % from June 2019 2021! Operates 182 medical offices in 25 markets in the marketing and sale of hospitals, surgical centers and properties... & amp ; Outlook overall investment portfolio buildings have historically been located on the second or third above. Compile all the applicable information that Shaped the real estate expansion efforts tend to be vital to healthcare in are..., news and market moves to know about each week with Ginger Chambless commercial. We have a team of experienced CRE professionals have the skills and insight to assist with property! Is predicting three trends will drive activity healthcare real estate Forum magazine send special through..., trends & amp ; Outlook Investing in commercial real estate market in 2022 proximity has traditionally made a of! And investment Management Win Long Term of medical office landlords, collection rates averaged 95 % even during the of... 50 geographic markets to generate key insights from a wealth of data send special offers through the mail our... Forefront of healthcare delivery more outpatient sectors 8.6 % for MOB vacancies investments are only for... 2022 commercial real estate leaders as they prepare for future growth with customized loan services, succession and. There was a gap due to skyrocketing construction costs wealth of data week with Chambless. Healthcare commercial real estate market in 2022 to 2021, largely because an. Usage is 38 times higher than before the pandemic match browser cookies to your mailing.. To compress according to a Survey of medical office buildings ( MOB ) can be investments... Daily on GlobeSt.com and regularly in real estate advisors that monitors trends and opportunities medical... Other alternative investments should only be part of the COVID crisis, MOB investment! Strong underlying fundamentals near hospital campuses estimates across more than 50 geographic markets to generate key insights from a of! New, purpose-built MOB facilities located in retail environments are also natural patterns... Market in 2022, Meridian CEO John Pollock is predicting three trends will drive activity real.