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  • Writer's pictureAnvers Capital Partners

Defying Market Trends: Medical Office Buildings

Executive Summary

The healthcare industry is not without its challenges, especially given the volatility in capital markets and ongoing financial constraints. However, our comprehensive survey reveals that Medical Office Buildings (MOBs) continue to be a beacon of stability and lucrative investment. Covering a diverse range of real estate investors, the survey’s key findings are highly promising for the industry.

Key Takeaways

  1. Occupancy Rates are Stable or Improving: Nearly 90% of the survey respondents reported that occupancy rates for MOBs have either improved or remained the same over the last year.

  2. Optimistic Outlook for 2024: A significant 86% of respondents expect their MOB portfolio to perform the same or better in the upcoming year.

  3. Robust Rent Growth: 84% of survey participants anticipate annual rent escalations of 3% or more for new or renewed MOB leases.

  4. High Lease Renewal Probability: 80% of those surveyed believe that there’s an 85% or higher probability of lease renewals.

  5. Tenant Improvement Packages: Although 76% of respondents indicated that more aggressive tenant improvement packages have been required, only 16% said that they've had to be more aggressive in offering other lease incentives such as free rent.

Digging Deeper


Stability Despite Market Fluctuations

The fact that almost 90% of respondents have reported stable or improved occupancy rates is a testament to the resilience of the healthcare real estate market, even when other sectors are wavering.

Room for Growth in 2024

An overwhelming 86% of investors foresee their MOB portfolio performing the same or better in 2024, further underlining the enduring attractiveness of healthcare real estate as a stable asset class.

Inflation Impacting Tenant Improvements

While there is an increased demand for aggressive tenant improvement packages, this seems to be driven more by inflationary pressures than by an increase in landlord concessions or broader improvement requirements.

About the Survey Respondents

  • Comprised of 37 healthcare real estate investors

  • Collectively managing over 60 million square feet of MOBs

  • Representing diverse investor platforms


Conclusion

The healthcare real estate market, particularly in the subsector of Medical Office Buildings, demonstrates a robust and resilient profile despite external market challenges. The cap rates are up, which means valuations are down and transaction volumes are also reduced. This could potentially offer a unique window of opportunity for investors to buy high-performing assets at historically attractive valuations.




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