Investor Competition Intensifies for Medical Office Properties

Demand for stabilized medical office buildings (MOBs) and new development is on an upswing, according to market experts, with cap rates matching pre-recession record levels.

The average cap rate for performing MOBs declined to 6.5 percent in the first half of 2015, almost reaching the record low of 6.2 percent achieved in the third quarter of 2007, according to a recent report from health care advisor firm Brown Gibbons Lang Real Estate Partners. Vacancy in the MOB sector has dropped to 10.9 percent, one of the lowest rates of any commercial property type.

The investment sales market is healthy from the demand perspective, according to the report, with 1,176 transactions completed through the first half of the year, totaling about $11.9 billion. In comparison, there were 950 transactions totaling $9.8 billion completed during all of 2014. Christopher Stai, managing director at Brown Gibbons, says among other trends, provider-based clients are conducting strategic reviews and looking closely at monetizing both core and non-core assets, transferring ownership and valuation risk, and redeploying capital towards growth opportunities and other core areas of their business, while maintaining a degree of control over the assets.

See entire article in National Real Estate Investor.

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