August 27, 2019
Hilda Martin

MOBs Can Weather a Storm

In recent weeks we’ve seen significant volatility in the stock market along with increasing fears of a recession. After all, this is now the longest market expansion in history. It can’t continue forever, right? Consequently, we’ve had a number of inquiries here at Revista all centering around one question – how did MOBs handle the last recession? The tenants of medical office tend to be stickier than those of regular office, often signing leases for 10, 15 even 20 years with built in annual increases. Once they’ve established a patient base, they don’t want to leave it. Medical services are in many cases non discretionary, so the business of many physician practices will be less impacted by shifts in the overall market. This all suggests a certain level of immunity for the sector, and it’s all fine and dandy to speculate, but what does the data say? Revista collects data on the portfolios of some of the largest investors in the sector. This data goes back far enough to tell some of the story. Below is a chart from our Industry Fundamentals Report showing occupancy going back to early 2009 – never falling below 90%. For the broader office sector, vacancy peaked in 2010 at upwards of 17% (83% occupancy), a time when medical office was rebounding after a much a smaller dip. This history of resilience is very appealing to investors, both locally and overseas, and is part of the reason there has been so much interest in the sector. Subscribe to Revista to get more insight on the past and keep up with new developing trends!

Represents roughly 150 million square feet of investor owned MOBs.