Al Brooks, Head of Commercial Real Estate, Commercial Banking. There was not much of a downturn in construction activity for MOBs, and rents are holding up well. Leasing activity fell 10.8% in the fourth quarter to 40.7 million s.f. Below is a primer on what investors need to know about medical office buildings. Despite suffering setbacks during the pandemic in 2020 and 2021, the commercial real estate industry has a positive outlook heading into 2022. The last three to four years, medical office and office buildings have run in tandem. Some regions, like New York and Los Angeles, have higher asking rents but these areas also have lower vacancy rates. The transaction values the portfolio at $1.78 billion and is expected to generate $1.3 billion in proceeds for Medical Properties Trust. Thats how you know you can trust our firm to see your investments through. 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. JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. 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Construction of new medical office buildings tends to lag the construction of other property types, in large part because these facilities are expensive to build and often require purpose-built facilities. ABSORPTION outpaced new development completions by mid-year 2020. The information represents EquityMultiples view of the current market environment as of the date appearing above. 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. 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. A comprehensive cost assessment may also factor in any potential tax implications (though MOB is heavily tax-advantaged, as properties can usually be depreciated to offset an investors taxable revenue). Unlike many CRE practices, HBRE solely focuses on healthcare real estate. These reports can be especially telling as they indicate the types of healthcare the local population is most likely to need and will influence the types of tenants a MOB investor tries to attract to a building. Yet, these 10 retail brands prove there are many untapped opportunities in the year ahead. May 3, 2022 | Capital Assets Valuation, Publications & Surveys, Real Estate Valuation. 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 change [], GlobeSt panel remains upbeat about the prospects for LSRE By Murray W. Wolf As we all know, were in a period of economic uncertainty that is resulting in a slowdown of life sciences real estate (LSRE) transactions, financing, development and leasing activity. Download this eBook and learn how CRE professionals can proactively manage economic challenges by leveraging the power of data. The decline in healthcare employment was a result of some patients pausing treatments and rescheduling routine visits during the depths of the pandemic. The 2022 Medical Office Fundamentals Outlook explores and illustrates timely real estate-related topics for medical office buildings, including rental rates, development trends, preferred product type, COVID-19 impacts, and pricing parameters. Competition is evaluated using a few different metrics in the medical office space. Improve your working capital, reduce fraud and minimize the impact of unexpected disruptions with our treasury solutionsfrom digital portals to integrated payables and receivablesall designed to make your operations smoother and more efficient. 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. As investors plan for 2022, Meridian CEO John Pollock is predicting three trends will drive activity healthcare real estate. The 2023-24 HREI Resource Guide is now accepting orders. Individual investors are following suit. Hyperlinks to third-party sites, or reproduction of third-party articles, do not constitute an approval or endorsement by EquityMultiple of the linked or reproduced content. Enter your email above to receive messages about offerings by Informa, its brands, affiliates and/or third-party partners, consistent with Informa's Privacy Policy. UNLMTD Real Estate Group. ft. of medical office development currently in the construction pipeline throughout the United States. Global Medical REIT Inc. GMRE (the "Company" or "GMRE"), a net-lease medical office real estate investment trust (REIT) that owns and . The Fed will continue raising rates until it sees a marked reduction in inflation nearer to its 2% target. Another way to evaluate MOB competition is by looking at rental rates in the market. The public and private sectors must work together to prioritize infrastructure to help the economy grow. The . We focus our investments on net leased properties. Lee Asher, [], Frisco Medical Pavilion II Receiving Interest from Healthcare Users Across Specialties (FEB. 23, 2023 DALLAS) Caddis Partners hosted a groundbreaking to commemorate Frisco Medical Pavilion II. Over the last six to eight years, medical office rents have stayed pretty much within a $4.00/SF range. The COVID-19 pandemic is continuing to affect office space real estate trends. A once in a lifetime bull market for advice. That doesnt mean that MOB properties are any less nuanced today than they were pre-pandemic. Access the latest quarter commercial real estate results for the office sector nationally. Our portfolio includes medical, retail, industrial and office properties. Several factors are driving this growth in demand for MOBs. We focus our investments on net leased properties. Similarly, as competition for skilled healthcare workers increases, facilities located in a retail environment may find it easier to attract and retain staff. We maintain an ongoing relationship with healthcare industry personnel to ensure we are keeping up with the latest news in the sector. There is currently an excellent market for veterinary real estate, and DVMs are finding it lucrative to sell their properties while remaining in the facility and continuing their practice. As with any investment, MOBs offer unique opportunities and considerations. Users gain access to excellent real estate deals and build a diversified global, high performing portfolio. Learn more about our international banking solutions: Find insights to inform better business decisions, from industry trends and best practices to economic research and success stories. 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. 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. Banking services are provided by Blue Ridge Bank, Member FDIC. Saudi commercial real estate in 2022. This allows physician practices to refer patients to one another (e.g., a primary care doctor referring a patient to a specialist), which has become increasingly common as healthcare becomes more technical and specialized. Atlanta and Chicago are tied for the greatest amount of medical office space under construction among the top ten metro areas, with both at 1.7 million square feet under construction. Seasoned in a wide range of real estate transactions, including hospital and physician acquisitions, divestitures, and basic medical and commercial leases. It only took a global pandemic for people to reconsider. At the very least, technology will continue to be vital to healthcare in 2022 and continue to grow and evolve. This is especially true in rural or other tertiary markets where campuses are less common. Abby Blumenfeld is the Investor Relations Analyst at EquityMultiple. Another source reveals that in the third quarter of 2021, the Boston-Cambridge area increased to 42 million square feet of lab inventory. For the first time, medical office cap rates are now lower than traditional suburban office cap rates which is indicative of growing investor demand and optimism about the sector. According to CoStar, a commercial real estate database, MOB asking rents average around $22.30 per square foot (NNN). Additionally, tech like AI and drones may be a part of pharmaceutical production and delivery in the futureif not in 2022, then perhaps within a decade or two. If you are an active subscriber, please log in. Facebook Linkedin Twitter Youtube Instagram TikTok. Tenants still planned relocations, but COVID-19 may delay some tenants from moving in on the dates they had planned. Those who have significant resources, time, and energy to invest in a property may pursue a value-add strategy at a Class B or Class C property. When considering a MOB investment, one of the first things to look at is population density. According to Colliers, office vacancies were at 12.6% in mid-2020 vs. just 8.6% for medical office buildings. According to a recent CBRE analysis, although healthcare employment experienced a pandemic-induced dropoff in 2020, the decline (6.4% year-over-year) was much lower than employment losses for the broader economy (11.2%). Please review its terms, privacy and security policies to see how they apply to you. Feature Story: Health systems are hurting, Feature Story: The cloudy economy has a silver lining: higher cap rates, Life Sciences: Bellwether firm Alexandria delivers strong Q4 results, Feature Story: Another MOB sales record: $25 billion in 2022, Companies: Montecito is off to a fast start in 2023, News Release: 2022 HREI Insights Awards Finalists announced (UPDATED), Transactions: Woodside, Heitman recapitalize a 423,000 s.f. US Office Market Statistics, Trends & Outlook. In 2020, the average price per square foot rent for MOB buildings increased by a more substantial 5.5%, a factor attributed to limited supply. Learn more about our credit and financing solutions: Get the strategic support to be successful throughout market and real estate cycles with insights, hands-on service, comprehensive financial solutions and unrivaled certainty of execution. This shows that despite economic swings, medical office rents are reliable. Class A medical office buildings tend to be newer with modern-day layouts, systems, and amenities. Using Debt for Real Estate Investing: Is It a Good or Bad Idea. At the very least, technology will continue to be vital to healthcare in 2022 and continue to grow and evolve. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. 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. 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. These properties are not as well located. Exclusive discounts on ALM and GlobeSt events. They can feature extensive amenities and full tenant fit-outs, or they might be simple properties geared toward single tenants, like a primary care physician or dental office. 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. Stifel Co-Head of Healthcare Investment Banking. To put these costs in perspective, medical office buildings cost an average of $498 per square foot to build compared to distribution centers ($214/SF), strip malls ($245/SF), and traditional suburban office ($313/SF). Indeed, they have particular quirks that are important for investors to understand. Moreover, leasing medical office properties can be more time-consuming and complex than leasing traditional office space. Note: Based on four-quarter sum of transactions. Unlimited access to GlobeSt and other free ALM publications, Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications, 1 free article* every 30 days across the ALM subscription network, Exclusive discounts on ALM events and publications. JLL Healthcare provides a full range of real estate and facilities . According to CBRE data, the average cap rate on sales of MOB facilities compressed by about 20 basis points year-over-year in 2020, with the average cap rate for portfolio sales declining by 100 basis points to about 5.52%. However, increased investor demand and limited asset availability is causing cap rates to compress. Trends indicate that doctors and patients alike prefer a multi-sensory, face-to-face examination that simply cannot be achieved via video conferencing. The commercial real estate landscape has been shaken up over the past 18 months, with challenges presented for both businesses and landlords alike. Nationally, there was 15.3 million square feet of net absorption in 2020 with just 13.7 million square feet of space delivered. Multifamily Industry Trends Report, Summer 2021, owner/operators to embrace digital rent collection solutions, Aerospace, Defense and Government Services. Related: What do you Mean by the Economy? But other advancements may begin to require new types of healthcare commercial real estate (CRE) spaces. Some of these benefits are simple, like the sheer fact that parking is more robust (and more likely to be free of charge) in suburban and rural areas. Asking rents have remained relatively steady over the past six to eight years, never fluctuating by more than +/- $4 per square foot on average. Sign up for the latest industry news and availabilities. Nevertheless, for those willing to understand the sectors nuances, a medical office can be a tremendous addition to an investors portfolio. Retailers faced a wide range of challenges in 2022. Despite the compression of cap rates, medical office cap rates are still higher than multifamily cap rates which are hovering in the low 5% range nationally. Despite being in the early stages of 2022, the . All research and other information provided on this website has been prepared for informational purposes only and EquityMultiple assumes no liability or responsibility for any errors or omissions in the content of this website or any linked website. Total expenses for the fourth . 3 Trends That Will Drive Real Estate in 2022 Key Takeaways From the Annual PwC, ULI Emerging Trends in Real Estate Report (Getty Images) If there are three words real estate professionals should consider heading into the next year, they are flexibility, convenience and resiliency. MOBs are dark blue and office buildings are light blue in the graph provided by Real Capital Analytics below. When buying a medical office building, investors should look at the specialty healthcare services provided by the local hospital network. Revista (a medical property research platform) showed average asking net rates around $21.40/SF at the same time. Medical Office Real Estate Trends 2022 1. Investors, particularly institutional investors, are taking note. 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. Researched assets in the Real Estate, Healthcare . That is a slightly higher percentage than it has been over the last decade. Health care employment fell by as much as 6.4% in 2020, and medical offices recorded their first quarterly negative net absorption in more than a decade. Subscribe to our commercial real estate newsletter. Patients still need to receive medical care in areas like these, and medical office buildings offer tremendous value for physicians practicing in these places. 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. Ben Reinberg is Alliance Group Companies' founder and CEO. 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. Related: Is there more to investing than Making Money? These properties are built to be fully ADA compliant and will typically feature high-end finishes and aesthetics. 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