Last year 77 medical office projects started that will be over 100,000 square feet when completed. That's quite an uptick over previous years when we averaged less than 50.
The MOB Scene
December 17, 2019 Mike Hargrave
Single Property MOB Cap Rates Creeping Up
Overall, MOB cap rates have continued to remain at lower levels compared to just a few years ago. According to Revista’s 3rd Quarter, 2019 Medical Real Estate Transactions Report, the US MOB average cap rate 6.4% which was down slightly from 6.5% in 3Q18.
If you have seen Revista’s metro trends you may have noticed the Baltimore MOB market is one of the tightest in the country. The MOB occupancy rate has averaged between 93.9% and 94.8% since the 2nd quarter of 2018.
So much of the conversation in the industry right now is about placing medical services out into the community to be more convenient and cost effective for patients. But what is that community going to look like in 10 years? 20 years? Flexibility becomes the name of the game.
Let’s take a look at the Jacksonville market. At 7.7 million square feet (MSF), Jacksonville’s MOB market is the 36th largest market in the US based on total SF.
After a slow start to the year, medical office building (MOB) sales have picked up in the second and third quarters (Q2 and Q3), providing a very strong possibility that the final 2019 volume will top $10 billion for the fifth straight year.
It doesn’t look as if anyone is going to dethrone Oakland, Calif.-based Kaiser Permanente as the country’s largest owner of medical real estate anytime soon.
For the sixth consecutive year, Kaiser, a health insurer and provider with 8.6 million members in nine states, sat atop the annual “2018 Top 50 Owners of Medical Real Estate” report compiled by Revista, which gathers and provides a wide variety of healthcare real estate (HRE) data, statistics and reports for its subscribing members.
Taken together, the Hospital and MOB sector is valued at $1 Trillion
There are currently about 600 medical office projects under way across the country. More than 15 percent of those projects include orthopedics. Why do so many projects include this specialty?
Revista is thrilled to announce that Andrew Haslam, Chief Asset Officer for Providence St. Joseph’s Health System and Tom Errath, Director for Harrison Street Real Estate Capital will co-chair the 2020 Revista Medical Real Estate Investment Forum.
The country’s healthcare-focused REITs have always been, and are likely to continue to be, an important investor group in the medical office building (MOB) acquisitions sector.
While MOB transaction activity might have cooled somewhat and MOB construction remains steady, deliveries of hospital projects have been on a spike. Based on projects that have either opened or are scheduled to open by the end of the year, we will be adding roughly 35 million square feet to inventory in 2019.
There’s plenty of talk in the medical office building (MOB) sales sector that even though demand remains as high as ever for the product type, the volume has been quiet so far in 2019. Second quarter (Q2) and year-to-date MOB sales statistics compiled by healthcare real estate (HRE) data firm Revista, which provides a variety of HRE data to subscribers, confirm this notion.
Revista has posted its 2017 Year End Transactions Reports for subscribers to its data service. By most accounts, 2017 was a record year for the sector in terms of transaction volume. Overall $21.8B worth of hospital and medical office real estate traded hands in 2017.
MedCraft Healthcare Real Estate was the most active developer in 2017 with a total of 8 projects and 470,000 square feet started or completed. NexCore Group was the most active for project starts and HTA Development LLC was the most active for project completions.
Colliers-Houston provides updates about the Texas Medical Center, changes and growth regarding the numerous health systems, cutting-edge hospital design, new MOBs, growth of clinics' sizes, and notable healthcare property sales in Houston.
Prior to the start of 2018, several members of the Editorial Advisory Board (EAB) of Healthcare Real Estate Insights™ predicted that the sector would see some transactions in which health systems would buy medical office buildings (MOBs) that they are leasing from third-party owners.
Continuing focus on high medical office sales activity might lead one to wonder where all this activity is occurring. In 2017, more than 25% of sales volume was represented in only 5 metro areas. Who's leading the pack?
Revista is pleased to announce the addition of three new executives, Randal Brand, Dan Eppley and Andrew Haslam, to its distinguished Advisory Board.
Randal Brand has for the past nine years been the Director of Facilities and Support Services for Seattle, Wash.-based The Polyclinic, an independently owned physician multi-specialty medical group with over 240 physicians and providers in 500,000 square foot of space in 12 locations. One of Mr. Brand’s major milestones was project management for the aggressive 18-month development of The Polyclinic’s flagship $55 million, 205,000 square foot location at Madison Center.
Dan Eppley, a Senior Vice President at Capital One Healthcare, joins his Capital One colleague Erik Tellefson on the Revista Advisory Board. Mr. Eppley is a tenured healthcare finance and real estate professional with more than 20 years of experience. He joined GE Healthcare Financial Services in 2006 and held various leadership positions with its real estate group until Capital One acquired the business in 2015. Mr. Eppley currently leads the underwriting of real estate transactions for medical office, seniors housing and skilled nursing.
Andrew Haslam, Chief Asset Officer, Real Estate and Construction, Providence St. Joseph Health, also has joined the Revista Advisory Board. He has experience in various healthcare settings, including critical access hospitals, corporate services, health insurance and real estate. Mr. Haslam currently has oversight of more than five regions of real estate professionals, and the Providence Health & Services portfolio of over 22 million square feet, 3,000 leases and more than 900 buildings with annual lease responsibilities of nearly $200 million.
Revista relies on the industry knowledge and experience of each of its advisory board members to help drive the growth and future products it will provide to the medical real estate industry.