Medical Office Building Sector Remains Stable, Attractive

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Having weathered recent headwinds, the medical office building sector is seeing a return to more stable property fundamentals, according to a new Medical Office National Report from Institutional Property Advisors.

There was a COVID-driven fall-off in medical visits in 2020, but this has “generally dissipated,” the report states, adding that “medical office vacancy has stayed between 8 and 10 percent and, in June 2023, the rate was just 50 basis points above the long-term average.”

Rising construction costs have helped to prevent overbuilding, with medical office space totaling only 10.7 percent of the overall office pipeline. IPA points to a very different factor limiting the product type: “… the sector’s main challenge is not supply, but rather a health-care labor shortage.” The pandemic has exacerbated an existing worker shortage that may hinder practices seeking to expand to meet future medical care demand.

High interest rates have affected both deal flow and pricing. Transaction velocity in the MOB sector fell by more than 30 percent over the 12 months that ended in June.

“The average sale price has begun to recalibrate accordingly,” IPA reported, “dropping 3 percent from the high reached in 2022 to $295 per square foot for the yearlong span ended in June.”

MOB regional performance

MOB regional performance. Table courtesy of IPA Research Services; Bureau of Labor Statistics; Federal Reserve; Centers for Medicare & Medicaid Services; Moody’s

On top of that, a paucity of transactions, especially those of $10 million or more, have hampered price discovery.

Geographic Diversity

A variety of regions across the country split up top marks for different performance metrics.

The Mid-Atlantic and the Southeast (driven by Florida) lead in terms of low average vacancies, and the former is tops for a falling overall vacancy, having dropped by 40 basis points year-over-year. The Mountain States too have seen a sizable fall in overall vacancy, by 30 basis points.

Asking rents are highest (at $32.74) in the Pacific region, and lowest in the Midwest ($17.50). Rental growth was far and away the highest in the Central Plains region, with 7.8 percent year-over-year. The Northeast (4.6 percent) and Southeast (4.5 percent) were essentially tied for a distant second place.

 

Source: Commercial Property Executive

Senior Housing Demand Continues To Outpace New Supply

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The senior housing market appears set for a steady and ongoing recovery, with occupancy levels in 2024 expected to meet or exceed pre-pandemic levels, provided no unforeseen difficulties occur.

That is the conclusion of an analysis of 3Q 2023 data by the National Investment Center for Seniors Housing and Care (NIC).

Senior housing occupied stock is now 2.6% or 15,026 units above the pre-pandemic 1Q 2020 level, NIC found. Demand continued to outpace new supply for the ninth consecutive quarter. In primary markets, net absorption rose 1.3%, or 7,583 units, from the previous quarter and 4.3%, or 24,627 units, over the prior year. The stock of senior housing in these markets rose 0.4% from 2Q 2023, and 1.3% above the prior year, NIC stated.

However, construction remained below pre-pandemic levels, and the 11,133 units under construction in the year ended 3Q 2023 amounted to less than half the starts reported during all of 2019. A new measure of senior housing, the Absorption-to-Inventory Velocity ratio, stood at 28:10 for primary markets, which implies that for every 10 newly added units, 28 were absorbed. This indicates that the senior housing market has been able to absorb a significantly higher number of units than were added during the third quarter of 2023.

The senior housing all-occupancy rate rose to 84.4% in 3Q 2023. It remained below the 87.1% rate of 1Q 2020. However, it is expected to reach or exceed that level in 2024, NIC predicted. Risks remain in the form of economic uncertainty and the possibility of a future threat to public health.

However, current capital market conditions and the resulting lending environment, today’s relatively limited construction pipeline, and elongated delivery times of new projects suggest that supply growth is manageable and is not expected to outpace demand through 2024, the report noted.

It also pointed to differences in the all-occupancy rate between independent and assisted living facilities in primary markets. It stood at 86% for majority independent living properties, a 0.7% increase from 2Q 2023. For assisted living, it stood at 82.6%, up 0.9%. Though occupancy for both was above pandemic lows, in neither case did it reach pre-pandemic 1Q 2020 levels.

In secondary markets, though, the occupancy rate for majority assisted living facilities reached 84.3%, slightly above its 1Q 2020 level of 84.2%, indicating a full recovery explained by limited inventory growth and restrained supply pipelines. The one good thing that did emerge from the pandemic, NIC commented, is increased recognition of the value proposition that senior housing offers. It also highlighted the resilience and adaptability of senior housing operators.

 

Source: GlobeSt.

Tepeyac Community Health Center in Denver’s Elyria-Swansea Neighborhood Celebrates Grand Opening

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A new health center is bringing much-needed services to families in Denver’s Elyria-Swansea neighborhood.

The new state-of-the-art 24,500-square-foot Tepeyac Community Health Center opened at the corner of E. 48th Avenue and Vine Street.

“We’re in a neighborhood that hasn’t had a grocery store in it for over 50 years; we’re in a neighborhood that hasn’t had a pharmacy,” said Kristin Weber, director of development at Tepeyac Community Health Center.

That changed, now that the non-profit health center opened its doors.

“When we say we were built by the community, for the community, that is the truth. And that’s an awesome story to tell,” said Weber.

Their story started out of an 800-square-foot home on Denver’s north side 30 years ago. And now the new clinical facility, which shares space with 150 units of affordable housing, is bringing healthcare to families separated from the rest of the city by Interstate 70 to the south and Interstate 25 to the west.

The convenience means everything to Tycora Jones, who lives right next door.

“We don’t have to worry about catching buses and doing the bus stops and the kids driving us crazy on the trips,” said Jones.

Inside the clinic, patients of all ages can receive medical care, dental care, x-rays, and behavioral healthcare. There’s even an on-site pharmacy and access to fresh food.

The clinic’s providers are bilingual and accept health insurance or self-paying patients who pay what they can for care that is needed. Tepeyac expects to serve 23,000 patients in the next five years.

“This is a beautiful space and this is care that everyone deserves,” said Weber.

View the Denver7 News video ‘A New Health Center Is Bringing Much-Needed Services To Families In Denver’s Elyria-Swansea Neighborhood‘ below.

Source: Denver7 News