August 14, 2019
Following a 33% decline in investment activity during 1Q 2019, the medical office sector continued to experience a slowdown during the second quarter, according to Real Capital Analytics (RCA). The New York City-based research firm reports that investment activity for medical office properties shrank 5% year-over-year during 2Q 2019.
Roughly $12 billion worth of medical office properties traded during the second quarter, a low not seen since 2017, according to RCA. And that number is misleading given that one of the largest MOB deals of this decade closed in June— Welltower’s $1.25 billion acquisition of 55 properties from CNL Healthcare.
Without that one mammoth deal, investment activity in the sector would be down a whopping 36% year-over-year, according to RCA. Meanwhile, individual asset sales volume fell 32% for the same period.
The slowdown hasn’t significantly impacted pricing for healthcare real estate. In fact, RCA reports that pricing remains tight for medical office properties, with cap rates averaging 6.6% for the second quarter. This cap rate represents a lower than the average 7% cap rate for suburban offices, which often track alongside medical office, according to RCA. Cap rates for medical office properties have been trending downward since 2012.
Despite the sector’s weakness this year, RCA’s report says “doom and gloom is not the order of the day.”
For questions, comments or concerns, please contact Jennifer Duell Popovec