Are Larger Medical Office Buildings More Valuable than Smaller Ones?
Attendees of this year’s Revista Medical Real Estate Investment Forum (MREIF) in San Diego received take home data briefs as a part of their attendance. One such brief profiled several interesting insights regarding transaction activity. The Medical Real Estate Valuations data brief contained a chart entitled MOB Cap Rates and Price per SF by size grouping of MOBs. The data covered these metrics for specific size groupings of MOBs from January 2017 to December 2018 (2-year period). The data shows a clear trend occurring during this time period – that Larger MOBs trade at lower capitalization rates (cap rate) than their smaller counterparts. The group of MOBs 80,000 SF and higher traded at an average cap rate of 5.8 during the 2-year period. This compares to cap rates of 6.0, 6.4 and 6.6 for MOB’s 40K SF to 80K SF, 20K SF to 40K SF, and 20K SF & under, respectively. The valuation difference also generally holds for price per SF aside from the 20K SF and under group. This group contains many single tenant high acuity properties such as dialysis and surgery centers which tend to trade at higher prices per SF.
Medical Office Cap Rates and Price Per SF by MOB Size Grouping; 2017 and 2018 (Source: Revista)