Nation’s Top MOB Markets Include Texas And The Midwest, And They Just Keep Growing

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Medical office buildings have proven to be a resilient asset class through the pandemic.

That’s because most tenants require these spaces to treat patients in person, providing a more stable tenant base for the asset class. And yet, these buildings are in short supply across the U.S.

Why? The buildings are more complicated to operate than a traditional office space—and more complicated to build—but investment in these facilities is growing, especially in Texas and the Midwest.

Using data provided by CRE research and listing platform CommercialEdge, 42Floors looked at the 25 biggest CRE markets across the U.S. and analyzed MOB construction activity between 2012 and 2021 to see how the asset class has gained interest for investment firms.

Overall, the top 25 medical office space markets in the U.S. grew 13% since 2012, adding more than 52.7 million square feet. Breaking it down, Los Angeles led the country for MOB square footage with more than 1,000 MOBs totaling more than 41 million square feet, which is far more than any other single market in the country, according to 42Floors.

That said, Houston ranked the second-largest MOB market in the U.S., which added 4.3 million square feet of medical office space over the decade, growing 15% to its current total of just over 33 million square feet. Dallas-Fort Worth, too, saw similar growth, based on the report, landing next on the list, adding 4.6 million square feet to its current 33-million-square-foot medical office footprint—16% growth since 2012.

Lower-tier markets with aging populations also saw some of the most growth during the decade, based on the report, like the Twin Cities. Minneapolis-St. Paul ranked No. 15 in the U.S. with 231 buildings totaling nearly 16 million square feet but has grown 24% in the last 10 years, adding three million square feet. That’s almost as much as was added in Los Angeles during the same period, which can be attributed to the city’s always-expanding 65-and-older demographic.

Finally, 42Floors found that Chicago’s market consisted of 28.8 million square feet across 427 buildings—the fourth largest MOB market. Chicago added more than 4.3 million square feet of medical office space and experienced 18% growth since 2012.

As for current developments in the Midwest, Chicago, Madison, Wis.; and Milwaukee will see three large projects delivered within the next two years:

• Chicago’s Joan & Paul Rubschlager Building at Rush (480,000 square feet) will be completed in Q3 of 2022;

• The Eastpark Medical Center in Madison (469,000 square feet) will be completed in Q1 of 2024;

• ThriveOn King in Milwaukee (455,000 square feet) will be completed in Q4 of 2023.

These three buildings will add more than 1.4 million square feet of medical office space to the region, based on the report.

 

Source: RE Journals

Denver Ranks As The Ninth Largest Medical Office Market In The U.S.

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Using information provided by CRE research and listing platform CommercialEdge, 42Floors looked at the 25 biggest industrial real estate markets and analyzed the last decade of medical office building construction activity — between 2012 and 2021 — to see how this asset class had blossomed into the spotlight for CRE investment firms.

Denver ranked as the 9th largest medical office market in the U.S.

Report Highlights:

• Denver ranks as the 9th largest medical office market in the U.S., with an inventory of 292 buildings, totaling 19.7 million square feet.

• 2.4 million square feet of medical office space were added to the market in Denver over the last 10 years, representing a 14% growth compared to 2012.

• In 2021, Denver logged the 3rd-largest completion of the year, with the 293,000-square-foot Denver Health – Outpatient Medical Center.

• Overall, the top 25 medical office space markets in the U.S. grew 13% since 2012, adding more than 52.7 million square feet.

Click here to read the full report.

 

Source: Mile High CRE

Nuveen Global Cities REIT Acquires Another $300M Worth Of Medical Office Buildings

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Nuveen Global Cities REIT is doubling down on recession-resistant real estate with the $300M acquisition of 10 healthcare facilities.

The 661K SF portfolio covers medical office buildings in four high-growth markets — Dallas, Pittsburgh, Tampa and Atlanta, per a filing with the Securities and Exchange Commission. More than 65K SF of new or renewed leases have been signed since May, signaling strong demand despite a downturn in the economy.

“These buildings are leased to best-in-class healthcare providers that are significantly invested in their space, with nine of the ten assets featuring tenants with imaging, surgical and/or oncology build-outs,” co-President and Lead Portfolio Manager of GCREIT Richard Kimble said in a statement.

The assets were 96% leased at the time of acquisition and are either newly constructed or newly renovated, according to the filing. Lease terms are on average 5.7 years and include a 2.5% annual bump in rent. More than 20% of the REIT’s investments and 1.2M SF of its portfolio are now concentrated in healthcare, per the filing. Earlier this year, CBRE predicted that about $25B worth of capital would flow into the sector this year, much higher than the nearly $16B invested in 2021.

That estimation may prove slightly off given the dip in activity seen at the midpoint of this year. Transaction volume in Q2 landed at about $2.9B, down from the $3.3B seen in the second quarter of last year, according to Commercial Property Executive. During the same period, though, average rents increased 20% to $356 per SF year-over-year.

“Medical office investment remains highly desirable as the underlying market dynamics for leasing and resale remain strong,” Zacuto Group Managing Director Jake Zacuto told Commercial Property Executive. “Medical tenants overall have very low default risk and tend to offer stability even during uncertain times.”

GCREIT is not alone in its strategy to invest in safe haven assets. In late August, CBRE Investment Management announced it would acquire a 282.6K SF, four-building MOB portfolio in Orange County, California, via a joint venture with Healthcare Realty Trust, according to GlobeSt.

Earlier, LTC Properties Inc., a California-based REIT, announced it would sink $62M into a joint venture to acquire three skilled nursing centers in northern Florida, per The Bakersfield Californian.

Source: Bisnow