Through Q3 of 2019, there was some speculation about whether the total MOB sales volume for the year would top the $11 billion threshold for the fifth straight time.
With the onset of the Covid-19 pandemic this will be an important metric to track in 2020 and beyond. Take comfort in the fact that over previous cycles/downturns the rate held up remarkably well, especially when compared to other asset classes.
The big shift that everyone involved in healthcare and healthcare real estate (HRE) has been talking about for years upon years has finally taken place, at least on the real estate side of the equation.
Classic economic theories establish a clear relationship between supply and demand for many goods and services. In real estate circles the theory says that as prices rise, demand (or occupancy) should fall.
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.
Well, the time certainly seems right to sell in 2017, as capitalization (cap) rates – the estimated first-year return on an investment – have reached all-time lows. Many high-quality portfolios and single MOBs with credit-rated tenants are trading at cap rates of 6 percent and below, some right around or even under 5 percent.
What are the drivers of change in the medical real estate market and how will the delivery of care shift to better meet the needs of patients? Plus, patient experience is a hot and challenging topic right now - and one where facility design and operations plays an important role. How do health systems and other healthcare industry experts evaluate the market – and patients – to develop their emerging delivery strategies? Should providers focus on medical office buildings (including multi-specialty MOBs); freestanding emergency departments; urgent care facilities; surgery centers; mixed-use healthcare, office and retail facilities; or physician-owned group practice clinics, among others?
...although roughly 25% of inventory is investor owned nationally, the stats vary widely by metro. Some areas are predominantly owned by healthcare providers while other areas have a significant portion, sometimes majority, of the real estate owned by a third party - whether that be a REIT, institutional fund or private investor.
The portfolio includes several class A assets such as the Harker Heights Medical Pavilion which is 100% leased and on the campus of Seton Medical Center Harker Heights.
The Big Three healthcare REITs – HCP, Welltower and Ventas –remained disciplined with acquisitions while non-listed REIT fundraising has limited their supply of new investment capital.
In the medical office building (MOB) space, large portfolio sales involving publicly traded companies usually grab most of the headlines. Recent blockbuster deals include Physicians Realty Trust’s (NYSE: DOC) $700 million acquisition of more than 50 MOBs from Catholic Health Initiatives in 2016 and Healthcare Trust of America’s (NYSE: HTA) $2.25 billion purchase of more than 70 medical office properties from Duke Realty Corp. (NYSE: DRE) in recent months.