medical office real estate trends 2022

Now in its 15th year, the HREI Resource Guide is the directory healthcare providers turn to when they need HRE professional services. According to a recent CBRE analysis, although healthcare employment experienced a pandemic-induced dropoff in 2020, the decline (6.4% year-over-year) was much lower than employment losses for the broader economy (11.2%). 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. The . Opportunity zones are areas designated by the government. The data supports findings from the Saudi office sector in 2022. A once in a lifetime bull market for advice. Trends that Shaped the Real Estate Market in 2022 are Here to Stay, with Many Leaving Lasting Impacts . Despite suffering setbacks during the pandemic in 2020 and 2021, the commercial real estate industry has a positive outlook heading into 2022. Or to subscribe to the monthly HREI magazine for even more comprehensive news and analysis, please click here. to register for our FREE healthcare real estate and/or life sciences real estate e-newsletters. Over the last six to eight years, medical office rents have stayed pretty much within a $4.00/SF range. Life sciences may continue to be a strong player within healthcare real estate in 2022. 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. 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. Download this whitepaper to learn which top retail CRE brands are poised for big things in 2023. Full Year 2022 Highlights. Of course, how (and how much) an investor wants to invest will undoubtedly guide their decision on which medical office building is best. Associate Ron Ott provided transactional support. The information represents EquityMultiples view of the current market environment as of the date appearing above. Given the trends outlined above, its no wonder why. Despite the pandemic, rent collections among MOB tenants remained strong. The full content of this article is only available to paid subscribers. If there is one thing we can take away from 2020, it is that healthcare must be delivered physically and virtually. The 2022 Outpatient Real Estate Development Report provides a wealth of information on medical office and other outpatient properties started and completed in 2021 by 3rd party developers. 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. The healthcare sector was one of the beneficiaries of the pandemic. Alliance invests in commercial real estate across the US. In addition, other financial metrics and calculations shown on the website (including amounts of principal and interest repaid) have not been independently verified or audited and may differ from the actual financial metrics and calculations for any investment, which are contained in the investors portfolios. In 2020, the average price per square foot rent for MOB buildings increased by a more substantial 5.5%, a factor attributed to limited supply. 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. Patients still need to receive medical care in areas like these, and medical office buildings offer tremendous value for physicians practicing in these places. At the very least, technology will continue to be vital to healthcare in 2022 and continue to grow and evolve. To put these costs in perspective, medical office buildings cost an average of $498 per square foot to build compared to distribution centers ($214/SF), strip malls ($245/SF), and traditional suburban office ($313/SF). Hybrid work models, sustainability and technology among key trends influencing Saudi commercial real estate, JLL says. Sometimes, but not always, these MOB facilities have an affiliation with a hospital in a larger metropolitan area, which allows the hospital network to provide one single continuum of care. 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. Abby is responsible for the development of prospective investor relationships, communication and being investors first point of contact at EquityMultiple. All Rights Reserved. Subscribe to our commercial real estate newsletter. MOB facilities located in retail environments are also attractive to patients and staff. Landscape version of the Flipboard logo . Our company never receives or stores any of this information and our third parties do not provide or sell this information to any other company or service. Wealth Management is part of the Informa Connect Division of Informa PLC. Some of these benefits are simple, like the sheer fact that parking is more robust (and more likely to be free of charge) in suburban and rural areas. FOURTH QUARTER 2022 HIGHLIGHTS INVESTMENT ACTIVITY Invested $310.3 million at a weighted average initial cash capitalization rate of 6.7%, including the acquisition of 17 properties with [], Posted in Breaking News, Capital Markets, Companies & People, REIT Report, Newmark acted as exclusive advisor to the portfolio owner and borrower, Montecito Medical Real Estate Newmark Senior Managing Director John Nero, Executive Managing Director Ben Appel and Senior Managing Directors Jay Miele and Michael Greeley of Newmarks Healthcare Capital Markets group led the transaction. For example, unlike traditional office users, medical office tenants often need highly specialized tenant fit-outs before committing to a long-term lease agreement. Users gain access to excellent real estate deals and build a diversified global, high performing portfolio. Investors, particularly institutional investors, are taking note. Learn more today. As more people show up in the office, its culture evolving. When buying a medical office building, investors should look at the specialty healthcare services provided by the local hospital network. Access the latest quarter commercial real estate results for the office sector nationally. 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. Moreover, rents are now on the rise. Trends indicate that doctors and patients alike prefer a multi-sensory, face-to-face examination that simply cannot be achieved via video conferencing. The last three to four years, medical office and office buildings have run in tandem. 1,000+ advisors. Medical Office Real Estate Trends 2022 1. Medical office tenants appreciate the proximity to other retail anchors like grocery stores and pharmacies, local neighborhood services that already draw their target demographic. Investors must be able to afford the loss of their entire investment. First, expect more outpatient sectors. The healthcare industry is rapidly growing. JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. The rise of telehealth initially created some concern that physicians would exit the medical office space instead of greater telehealth accessibility, but that has not proven the case. Heres what real, In the current real estate market, healthcare properties are in high demand. Developers are quickly converting some existing office spaces, but not every building is a good fit to include laboratory space. Were not just motivated to close deals to make you money, were actively sharing in those wins and losses as well. 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. The implied trends presented by CoStar and Revista are basically the same except for a bit of difference in the data from the two property statistics providers. Despite the compression of cap rates, medical office cap rates are still higher than multifamily cap rates which are hovering in the low 5% range nationally. We can package something to fit your specific financial situation. Our focus on this niche sector allows us to gain the unique skills necessary to serve this specialized market segment. Source: Real Capital Analytics, February 2021. As investors plan for 2022, Meridian CEO John Pollock is predicting three trends will drive activity healthcare real estate. Ideally, a medical office building will be located in an area that already receives significant car and foot traffic. Absorption rates are especially high in the Sun Belt region where robust population growth is driving demand for medical office space. Employment has been increasing since mid-2020 and by Q4 2020, was down only 1.5% year-over-year compared to 6.0% for the labor market as a whole. Yet, these 10 retail brands prove there are many untapped opportunities in the year ahead. US Office Market Statistics, Trends & Outlook. Neither the Securities and Exchange Commission nor any federal or state securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any of the information or materials provided by or through the website. Registered in England and Wales. 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. Another reason why real estate investors are bullish about medical office is because of its low vacancy rate compared to traditional office. 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 WM Morning Memo newsletter. Nevertheless, for those willing to understand the sectors nuances, a medical office can be a tremendous addition to an investors portfolio. Ownership of medical office buildings can take many forms, ranging from physician-owned properties and those owned by hospital systems to properties owned by much larger real estate investment groups, including real estate investment trusts (REITs) and other institutional investors. Originally published byCommercial Observeron December 16, 2021. 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. Economic headwinds have given investors pause at the start of 2023, fueling cautious strategies and a heightened focus on tenant quality. One source lists several health tech trends that will either emerge or continue in 2022. 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. These deals range in value from $1M to $25M. Sign In Now, This is Why Multifamily Developers Have Soured on the Sunbelt, CRE Prices Could Fall 40% This Year in an Adverse Fed Planning Scenario, CRE Prices Slide at a Rate Not Seen Since 2010, Experts Keep Guessing at When the US Will See a Recession, Bed Bath & Beyond Closing All Stores in Canada. Weve seen these trends expand over the last couple of years. Houston, Tampa, Phoenix, and South Florida have among the highest net absorption rates. These reports can be especially telling as they indicate the types of healthcare the local population is most likely to need and will influence the types of tenants a MOB investor tries to attract to a building. Construction of new medical office buildings tends to lag the construction of other property types, in large part because these facilities are expensive to build and often require purpose-built facilities. For example, the Internet of Things (IoT) medical devices segment could reach $9.4 billion by 2026. No communication by EquityMultiple, Inc. or any of its affiliates (collectively, EquityMultiple), through this website or any other medium, should be construed or is intended to be a recommendation to purchase, sell or hold any security or otherwise to be investment, tax, financial, accounting, legal, regulatory or compliance advice. Yes, vacancy is ticking up, but the worst the MOB market ever got (in 2009) was about 10.4% vacancy, so its holding up fairly well. Our professional team continually analyzes the market for excellent opportunities. Related: What do you Mean by the Economy? Though inflation eased in late 2022, it was still running at more than 7%. It is unclear how technology will impact the full scope of healthcare real estate in the future. Trends over several years show the medical office building (MOB) market appears to have survived 2020 pretty well, and these statistics are evidence of that sectors strength, particularly compared to the office market. For example, hospital real estate expansion efforts tend to be heavily regulated (from a compliance standpoint). With medical office buildings, the requirements for space generally depend on the number of providers and their associates who plan to occupy the building. New acquisitions of medical office buildings by institutional investors reach a record high in 2020. In 2020 and 2021, we released an overview of upcoming healthcare real estate trends. Resident demand for electronic payment and communication options is only growing. Facebook Linkedin Twitter Youtube Instagram TikTok. 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. According to a survey of medical office landlords, collection rates averaged 95% even during the depths of the pandemic. Public-private partnerships also play a critical role in growing the number of affordable and workforce housing units, as does increasing housing density. Recent U.S. Office MarketBeats. In Boston, a market known as one of the strongest in the life sciences segment, laboratory vacancy rates are about 1.7%. Finally, 2021 has arrived! The Medical Office Building (MOB) asset class has exhibited consistent growth in recent years, buoyed by increased demand for outpatient services and strong historical performance. MOBs are a subset of the greater office asset class and are growing in stature among experienced real estate investors. Abby Blumenfeld is the Investor Relations Analyst at EquityMultiple. Discover the latest numbers, news and market moves to know about each week with Ginger Chambless, Commercial Bankings Head of Research. Access Q4 2022 commercial real estate results for the office sector. Both medical office building [], A look at some big deals and JVs; slowing MOB sales; health system struggles By John B. Mugford As we entered 2022 and it looked as if the COVID-19 pandemic was finally in the rearview mirror, most of professionals involved healthcare real estate (HRE) were confident that good things were on the horizon for the [], MOBs remain a haven for investors, Cushman webinar panelists say By John B. Mugford The COVID-19 pandemic brought about many changes in how people go about their lives and conduct business. This will provide insight into the types of physicians looking to lease MOB space in that vicinity and the kind of healthcare practice that will dictate how much space those physicians need. UNLMTD Real Estate Group. Asking rates ended at $23.69 per square foot, moving up 3.7 percent compared to the same time last year. Services are migrating away from the acute care centers to more convenient outpatient centers Pollock tells GlobeSt.com. If you are interested in learning more about investing in commercial real estate, or if you have questions about buying, selling, or leasing a commercial property, please contact an HBRE advisor. Investments in private placements are highly illiquid and those investors who cannot hold an investment for the long term (at least 5-7 years) should not invest. One major factor is an aging population; with more people living longer, there is an increasing need for healthcare providers and services. Any financial targets or returns shown on the website are estimated predictions of performance only, are hypothetical, are not based on actual investment results and are not guarantees of future results. Medical office real estate was once considered so highly specialized that few individual investors wanted to add it to their portfolios. Ending the third quarter at 11.4 percent with positive net absorption rates investor relationships, communication and investors. 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