During the depths of the COVID crisis, MOB annual investment volume declined by 12.7%, according to Real Capital Analytics. Banking services are provided by Blue Ridge Bank, Member FDIC. Rental revenue for the fourth quarter 2022 increased 19.7% year-over-year to $36.3 million, reflecting the growth in the Company's portfolio. EquityMultiple is not registered as a broker-dealer. Ben Reinberg is Alliance Group Companies' founder and CEO. Navigating interest rate disruption: How real-time data can facilitate better CRE decisions amid volatility. Shovels hit the ground Friday, February 10 in a celebration attended by Caddis executives and other project stakeholders. MOB space under construction as a share of inventory is highest in Atlanta at 6.1%, followed by Miami at 5.9% and Washington, DC at 5.2%. 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). Related: Are You Investing Enough for Retirement? They should be sure to consider the cost of any potential building renovations and/or costly tenant buildouts, as well as any necessary operational improvements. Despite being in the early stages of 2022, the . Anyone looking to develop or otherwise significantly invest in their medical office building will survey the need to ensure that the money they plan to spend on the project can be supported by current market rents. Private placement investments are NOT bank deposits (and thus NOT insured by the FDIC or by any other federal governmental agency), are NOT guaranteed by EquityMultiple or any other party, and MAY lose value. The decline in healthcare employment was a result of some patients pausing treatments and rescheduling routine visits during the depths of the pandemic. But real success means understanding the local markets you servewhich is why we bring the business solutions, insights and market perspective you need. Office Space Real Estate Trends. Individual investors are following suit. Abby is a recent graduate of Quinnipiac University with a BA in Political Science. Such Investments are only suitable for accredited investors who understand and willing and able to accept the high risks associated with private investments. According to a survey of medical office landlords, collection rates averaged 95% even during the depths of the pandemic. This information contained herein is qualified by and subject to more detailed information in the applicable offering materials. May 3, 2022 | Capital Assets Valuation, Publications & Surveys, Real Estate Valuation. For example, hospital real estate expansion efforts tend to be heavily regulated (from a compliance standpoint). In July 2022, the Company sold its medical office building located in Germantown, Tennessee receiving gross proceeds of $17.9 million, resulting in a gain on sale of $6.8 million. Download this eBook and learn how CRE professionals can proactively manage economic challenges by leveraging the power of data. Real estate and other alternative investments should only be part of your overall investment portfolio. Click here to register for our FREE healthcare real estate and/or life sciences real estate e-newsletters. 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. Medical offices, once considered a niche product type, actually proves to be less risky than other niche real estate investment alternatives - something the investment community is starting to realize only as of late. Learn more about investing in MOB properties today. Absorption rates are especially high in the Sun Belt region where robust population growth is driving demand for medical office space. Retailers faced a wide range of challenges in 2022. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. Economic headwinds have given investors pause at the start of 2023, fueling cautious strategies and a heightened focus on tenant quality. The fourth quarter brought some relief from mounting macroeconomic challenges as inflationary pressures wane, but office tenants remain cautious as they adjust to rising costs of capital and falling valuations. 2023 Informa USA, Inc., All rights reserved, Target Needs to Make You Want to Spend Again, Six Reasons 2023 Is the Year of the 1031 Exchange, 10 Must Reads for CRE Investors Today (Feb. 28, 2023), Goldman Turns to Make-or-Break Unit as Solomon Put to Test, For Many Homebuyers, Its New Construction or Nothing, The 12 Best Business Books of 2022 for Advisors, The Most-Revealing Onboarding Questions Advisors Ask, Institutional Investors Take a Temporary Break on Medical Office Buys, Medical Office Deals Slow Down as Rising Rates Reset Price Expectations, Thanks to Pandemic Puppies, CRE Investors Are Turning Their Attention to Veterinary Clinics, Amazon to Buy One Medical for $3.49 Billion in All-Cash Deal, Litt Opposes Healthcare Realty Deal After Alternative Snubbed, Strong Demand for Health Services Drives Medical Office Development, The Medical Office Sector Continues to Hold Steady, Healthcare Realty Trust to Acquire Rival Medical-Office Owner, Elliott Pushes for Sale of Healthcare Trust of America, More Office Properties Are Becoming Labs in Top Life Sciences Cities, DigitalBridge Agrees to Sell Wellness Portfolio for $3.2 Billion, Macquarie to Buy 50% Stake in Medical Properties Trust Portfolio, Medical Tenants Appetites for Retail Space Remains Robust. 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. Medical office properties are expected to see a strong rebound in demand this year once the COVID-19 virus recedes. When considering a MOB investment, one of the first things to look at is population density. Vacancy decreased 150 bps year-over-year ending the third quarter at 11.4 percent with positive net absorption ending at 124,331 square feet. Patients still need to receive medical care in areas like these, and medical office buildings offer tremendous value for physicians practicing in these places. Therefore, their willingness to pay a premium for MOB facilities is ultimately grounded in whether they can still generate a sufficient return on their revenue. Even during the Great Recession when medical office vacancies were at their highest, MOB vacancies never exceeded 10.4%. Staff, who might otherwise be confined to an isolated office park, will be drawn to the convenience that retail environments offer as they can more easily pop out for lunch or to run errands on their breaks. It is unclear how technology will impact the full scope of healthcare real estate in the future. The information represents EquityMultiples view of the current market environment as of the date appearing above. Infrastructure investments tend to directly benefit commercial properties located in the area via increased access, higher quality amenities and services, and enhanced desirability for employers and households, Calanog said. Emily is a healthcare real estate and compliance professional specializing in hospital system lease negotiations, Stark Law and Anti-Kickback Statute compliance, on-boarding and transitioning of new lease administration and compliance oriented accounts, client support, and conflict resolution. Financial Results. The transition to. It only took a global pandemic for people to reconsider. Number 8860726. Receive our weekly newsletter with the latest posts and insights. Click on title to download: Q3 2022 U.S . An individual investor or real estate investment trust, for example, may not be subject to the same regulatory oversight. The combination will be the fourth largest commercial mortgage REIT, the companies claim. Source: CBRE US Research, Medical Office Trends 2021: https://www.cbre.us/research-and-reports/US-Medical-Office-Trends-2021. Competition is evaluated using a few different metrics in the medical office space. Feature Story: Investment outlook: Quick rebound or slow recovery? 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. These properties are built to be fully ADA compliant and will typically feature high-end finishes and aesthetics. Medical office buildings are an often overlooked asset because most real estate investors simply do not understand the nuances of this property type. Resident demand for electronic payment and communication options is only growing. About Knowledge Leader. The pandemic aside, healthcare occupations are expected to be in high demand for years to come. Copyright Wolf Marketing & Media LLC 2002-2023 Healthcare Real Estate Insights. Before investing in a medical office building, buyers should be sure to understand the distinctions between Class A, Class B, and Class C medical office real estate. At the InterFace Healthcare Real Estate (HRE) West conference in Los Angeles in February 2022, a panel discussion devoted to HRE investing was titled, Whos Buying, Whos Selling and Transaction [], Hospitals have taken a pounding but remain optimistic, InterFace panelists say By John B. Mugford For one prominent West Coast health system, the current economic climate and healthcare landscape are presenting a bit of a dichotomy. Increasingly, MOBs are opening on retail pad sites located at larger mixed-use projects. According to the U.S. Bureau of Labor Statistics, employment in healthcare occupations is expected to grow 16% between 2020 and 2030, much faster than the average for all occupations, adding about 2.6 million new jobs. 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. Note: Based on four-quarter sum of transactions. The property consists of over 178,000 square []. Terms of Use While technology will certainly play a role in the future of healthcare real estate, the need for physical space for procedures will remain a vital part of the health industry. In the first quarter of 2022, medical office building (MOB) sales topped $3.3 billion, and the market remains strong as we move forward in 2023. Any investment information contained herein has been secured from sources that EquityMultiple believes are reliable, but we make no representations or warranties as to the accuracy or completeness of such information and accept no liability therefor. 2022 | Capital Assets Valuation, Publications & Surveys, real estate expansion efforts tend be! 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