May 27, 2015
Though there is still some question as to how the healthcare sector of commercial real estate will perform as a result of the Affordable Care Act, this property type definitely has investor attention, and transactions could reach a record high this year, according to a recent Newmark Grubb Knight Frank report.
Last year $9.5 billion worth of medical-office properties traded, a 25 percent increase from 2013. Health care providers own about $1 trillion worth of real estate in the United States, leaving private investors much transaction potential as those companies not directly involved in real estate look to divest their assets.
Additionally, cap rates dropped 10 basis points year over year in 2014, down to 7.3 percent. Due to uncertainty about interest rates, they aren’t expected to decrease further but will likely remain flat.
In California, vacancy rates for medical-office assets are among the lowest in the country. San Francisco’s 3.5-percent led the nation, which had a 2014 average of 10.6 percent. San Jose was also low, at 5.4 percent. However, vacancy rates in Southern California were more in line with the national average.