Healthcare Real Estate Opportunity
The attractive investment environment for healthcare real estate is driven by stable & growing demand, favorable supply conditions, and strong acquisition opportunity.
Medical office demand is also driven by the strategic focus on outpatient delivery from healthcare service providers and insurers. They recognize outpatient delivery as a more effective & efficient strategy that leads to lower cost, convenience, and better outcomes. Technology advances will expand this advantage as innovation has and will continue to bring treatment availability to the outpatient setting. Furthermore, healthcare systems look to the outpatient network as feeders to their inpatient facilities.
Healthcare real estate supply suggests a market with substantial acquisition potential. The US market has $1T of healthcare real estate with approximately $315B in medical office. The 2016 year-end MOB vacancy rate of 7.4% signals favorable conditions for rent stability and growth. The low vacancy combined with increasing demand should continue to generate strong acquisition opportunities with attractive investment attributes. There are approximately 51,000 MOB facilities with 1.3B square feet. Public REITs own 17% of MOB’s leaving the majority owned by hospitals, providers, and investors. The need for capital, desire to focus on core competencies, and attractive valuations are compelling reasons for continued dispositions. The moderate level of MOB sales volume also supports an attractive and sustainable acquisition environment. MOB 2016 sales activity was $9.3B representing only 3.0% of the total MOB market.