Another source reveals that in the third quarter of 2021, the Boston-Cambridge area increased to 42 million square feet of lab inventory. Given the rapidly changing macro environment, estimates may not reflect . First, expect more outpatient sectors. Rent increases are expected to be more profound at new, purpose-built MOB facilities due to skyrocketing construction costs. It is also common for medical office investors to pull specialized reports that outline the types of health issues the population faces in a specific city, region, or state. Increased affordable and workforce housing: Mixed-income housing developmentswhich combine market-, workforce- and affordable-rate units in one locationare an important part of increasing the affordable housing supply. Nationally, there was 15.3 million square feet of net absorption in 2020 with just 13.7 million square feet of space delivered. And as investor appetite has grown, medical office buildings have emerged as the most popular property type within the niche. Technology upgrades: MRI Softwares Multifamily Industry Trends Report, Summer 2021 found that electronic payment adoption has grown consistently since 2019. Investment decisions should be made based on an investors objectives and circumstances and in consultation with her or her financial professionals. Medical office occupancy is relatively stronger than the commercial office sector and was significantly less disrupted by pandemic, with medical office asking rents averaging 2% growth year over year for the past five years and reaching an average $23 per square foot triple net by mid-year 2022. Shopping centers continue to appeal to medical clinics seeking to increase market exposure and accessibility. In 2022, we can continue to expect technology to be at the forefront of healthcare delivery. Moreover, rents are now on the rise. Navigating interest rate disruption: How real-time data can facilitate better CRE decisions amid volatility. 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. In addition to the low vacancy rate, CRE spaces have been converted into laboratory spaces to meet demand. The portfolio consisted of seven [], Posted in Breaking News, Companies & People, Outpatient Projects, Transactions, Physicians Realty Trust (NYSE: DOC) has added a new financial report to its website: Supplemental Q4 2022 Click here for a complete listing of Physicians Realty Trust (NYSE: DOC) reports. The source also includes extended reality tech products like the Microsoft Hololens, which surgeons can wear to view 3D holographic images of patient scans. With medical office buildings, the requirements for space generally depend on the number of providers and their associates who plan to occupy the building. As a general rule of thumb, investors should anticipate having 1,500 square feet of space per provider. 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. 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%. She has experience in residential real estate in both New York City and Boston. Facebook Linkedin Twitter Youtube Instagram TikTok. The sheer variety of medical office properties is what makes the space so compelling from an investment standpoint. Past performance is no guarantee of future results. Absorption rates are especially high in the Sun Belt region where robust population growth is driving demand for medical office space. Services are migrating away from the acute care centers to more convenient outpatient centers Pollock tells GlobeSt.com. Banking services are provided by Blue Ridge Bank, Member FDIC. Another reason why real estate investors are bullish about medical office is because of its low vacancy rate compared to traditional office. Revista notes that rents are steadily increasing by 2-3% per year. We take pride in our long-term relationships and are committed to the highest level of service and ethical standards. Rents remained in this range even during the Great Recession (compared to traditional office rents which decreased by nearly 15% during the 2008-2010 recession). Source: Real Capital Analytics, February 2021. Stifel Co-Head of Healthcare Investment Banking. The amount of space currently under construction nationwide totals less than 1% of the existing MOB stock. Please note that 214 respondents completed the H1 2022 Cap Rate Survey with their real time market estimates between mid-May and early June 2022. Investments in private placements are speculative and involve a high degree of risk and those investors who cannot afford to lose their entire investment should not invest. 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%. Medical office properties are expected to see a strong rebound in demand this year once the COVID-19 virus recedes. There are many things to consider before investing in a medical office building. At the other end of the spectrum is Class C medical office, which is older buildings (perhaps 1970s or 1980s vintage) that likely have lower ceilings, fewer windows, and more occasional patient and employee amenities. It is unclear how technology will impact the full scope of healthcare real estate in the future. Developers are quickly converting some existing office spaces, but not every building is a good fit to include laboratory space. With decades of commercial real estate experience, we take pride in committing to meeting the goals of our Sellers, as we consistently and seamlessly adhere to successful closings. Trends indicate that doctors and patients alike prefer a multi-sensory, face-to-face examination that simply cannot be achieved via video conferencing. Over the last six to eight years, medical office rents have stayed pretty much within a $4.00/SF range. Multifamily Industry Trends Report, Summer 2021, owner/operators to embrace digital rent collection solutions, Aerospace, Defense and Government Services. 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. All Rights Reserved. A MOB feasibility study will include a look at the health and wellness of the population, including the age ranges of residents. Our dedicated Investor Relations Team is standing by to help simplify your real estate investing process. Payment processing is provided by Dwolla, Inc. Investment advisory services are provided by EM Advisor, LLC, an investment advisor registered with the Securities and Exchange Commission. Already have an account? During this same time, conventional office was down 40.2%, multifamily investment volume dropped 27.6%, retail declined 42.8% and industrial investment slipped by 15.9%. This information contained herein is qualified by and subject to more detailed information in the applicable offering materials. Commercial real estate has also found innovative ways to increase the affordable and workforce housing supply. Equity Analyst, 360 Huntington Fund. 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. MOB facilities located in retail environments are also attractive to patients and staff. Though inflation eased in late 2022, it was still running at more than 7%. EquityMultiple does not make any representation or warranty to any prospective investor regarding the legality of an investment in any EquityMultiple Investments. One well-known trend that was already underway long before the pandemic is the rising proportion of patient care delivered in outpatient facilities. The healthcare industry is rapidly growing. 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). 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, MOB developers tend to be highly disciplined and do not build on spec; instead, they work to create an ecosystem of healthcare tenants that compliment one another (e.g., dentists, physicians, physical therapists and other specialty care providers). Related: Investors Must Think for Themselves. Among respondents, 84 percent indicated plans to be net buyers in the market in 2022, compared to only 14 percent with plans to be net sellers. On the surface, this may seem high, but it is lower than any other major property type. Registered in England and Wales. New emerging healthcare models like CloudClinics may inspire more unique healthcare spaces to enter the market. A once in a lifetime bull market for advice. Some markets, like Philadelphia, have less than 500,000 SF of development in the pipeline. Abby Blumenfeld is the Investor Relations Analyst at EquityMultiple. 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. 2023 Alliance Consolidated Group of Companies LLC | All rights reserved | Privacy Policy, The Medical Office Building Market: Trends Both Past and Present. Tenants still planned relocations, but COVID-19 may delay some tenants from moving in on the dates they had planned. Our team of experienced CRE professionals have the skills and insight to assist with all property transactions. They may need significant capital improvements to remain competitive in the marketplace. Asking rates ended at $23.69 per square foot, moving up 3.7 percent compared to the same time last year. US Office Market Statistics, Trends & Outlook. Copyright 2023 ALM Global, LLC. LA and NY have higher rates, but vacancy is lower. Note: Based on four-quarter sum of transactions. According to a survey of medical office landlords, collection rates averaged 95% even during the depths of the pandemic. Economic headwinds have given investors pause at the start of 2023, fueling cautious strategies and a heightened focus on tenant quality. JLL Healthcare provides a full range of real estate and facilities . The Fed will continue raising rates until it sees a marked reduction in inflation nearer to its 2% target. Related: What do you Mean by the Economy? By all indications, medical office is a resilient sector and as proven during both the Great Recession and pandemic, can weather economic downturns better than other property types. This shows that despite economic swings, medical office rents are reliable. The BGL Medical Office Market Update is a quarterly research publication highlighting national medical office building transactions and industry trends within the medical office building real estate market. One of the biggest complaints patients usually have about healthcare visits is long wait times. We focus our investments on net leased properties. Environmental real estate trends will be key in 2022. . The COVID-19 pandemic is continuing to affect office space real estate trends. 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. Related: Is there more to investing than Making Money? According to Stifel Co-Head of Healthcare Investment Banking Mark Dempster, the biotech and life sciences segment is still drawing investor attention. Such Investments are only suitable for accredited investors who understand and willing and able to accept the high risks associated with private investments. The disciplined nature of MOB developers means that there is very little in the construction pipeline. According to CoStar, a commercial real estate database, MOB asking rents average around $22.30 per square foot (NNN). It also opens the door to physicians looking to support their operations through on-site retail, such as dermatologists that sell their own private label skincare products or endoscopists who sell weight-loss programs. Ambulatory outpatient care facilities have been at the center of Meridians focus for years and we expect this trend to continue to accelerate and translate into more opportunities for investors, developers, and providers alike., *May exclude premium content The . Beth is Senior Vice President of Colliers International in Houston, Texas. Acquires $149 Million in Medical Real Estate During 2022. Our professional team continually analyzes the market for excellent opportunities. J.P. Morgans website and/or mobile terms, privacy and security policies dont apply to the site or app you're about to visit. Class B medical office real estate falls somewhere in between and may have Class A and Class C real estate characteristics depending on the property. The information represents EquityMultiples view of the current market environment as of the date appearing above. 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. Subscribe to our commercial real estate newsletter. This lack of new construction is helping to keep vacancies of existing facilities low and is driving MOB rents to all-time highs. However, we should note that labor, inflation, and rising interest rates may present a few challenges. 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. Updated infrastructure: An initiative to create and update infrastructure could enhance roads and bridges, which would help shorten commutes, enable quicker e-commerce last-mile deliveries and improve the economy. These properties are built to be fully ADA compliant and will typically feature high-end finishes and aesthetics. Currently, telehealth appointments require offices or flex spaces with appropriate technologies for physicians to virtually meet with their patients. There is more than 50 million sq. FOURTH QUARTER 2022 RESULTS AND RECENT EVENTS Results per diluted common share for the fourth quarter of 2022 were as follows: Net Loss: $(0.37) FFO: $0.25 Normalized FFO: $0.37 [], Chicago, IL | February 21, 2023 300K-SF Life Sciences Building will Promote Science and Technology Hub Near University of Chicago Campus; UChicago to Lease 55,000 Square Feet Trammell Crow Company (TCC), a global commercial real estate developer, and Beacon Capital Partners (Beacon), a leading real estate developer, owner, and manager of life science and office [], NEW YORK(BUSINESS WIRE)NNN Pro Group, the market leading investment sales firm in the country announced that it closed a record breaking $5.6 billion across over 1,200 total net lease transactions nationwide in 2022, up over 30% since the year prior. The CRS captures 3,600 cap rate estimates across more than 50 geographic markets to generate key insights from a wealth of data. Investing in private placements requires long-term commitments, the ability to afford to lose the entire investment, and low liquidity needs. The full content of this article is only available to paid subscribers. Opportunity zones are areas designated by the government. We maintain an ongoing relationship with healthcare industry personnel to ensure we are keeping up with the latest news in the sector. Historically, Class A medical office buildings have been located on or near hospital campuses though Class A MOB properties can now be found further afield. The public and private sectors must work together to prioritize infrastructure to help the economy grow. Yet, these 10 retail brands prove there are many untapped opportunities in the year ahead. Nevertheless, the industry is experiencing unprecedented change across the continuum of managing, leasing and developing healthcare facilities, requiring innovative strategies to confront economic shifts, capital constraints and the transformation of healthcare delivery. Recent U.S. Office MarketBeats. As yields for traditional real estate asset classes compress, we expect to see more investors institutional and retail investors alike pour capital into the medical office sector in search of higher yield and a relatively safe investment alternative. 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. Sign up for the latest industry news and availabilities. The transition to. 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. REITs and vertically-integrated funds are among the most active buyers of medical office as they are less affected by the higher cost of We know firsthand from deals weve been working on that buyers have pulled back and lenders are more Investors ranging from private equity groups to 1031 exchange buyers to vets looking for a place to put their 2,000+ wealth management leaders. Website and/or mobile terms, privacy and security policies dont apply to the same time last year every. The age ranges of residents indicate that doctors and patients alike prefer a multi-sensory, face-to-face examination that can. 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