Healthcare Real Estate Sales Are Picking Up. Here’s Why.

Amid growing optimism, healthcare real estate (HRE) professionals say investment activity is picking up again, fueled by improving market conditions, declining interest rates, and greater lender participation.

A panel at the 16th annual InterFace Healthcare Real Estate Conference in Dallas offered insight into why HRE is poised for a strong rebound in the near term.

A Market in Recovery

“Even last year, when it was a soft year, we had a stellar one,” said Ted Barr, principal at Cleveland-based Woodside Health, which specializes in acquiring medical outpatient buildings. “Now, we’re seeing more activity. More people are looking to transact and are asking brokers for opinions of value.”

Barr pointed to pent-up demand from both buyers and sellers, driven by the belief that interest rates have peaked and are now trending downward.

“Lenders are back in the market, they’re more willing to lend, and spreads are coming in,” he added.

Woodside has acquired 21 properties in the past 19 months. Barr explained that falling rates are narrowing the pricing gap between buyers and sellers, which had been a barrier.

“Sellers are more realistic, willing to take a bit less, and buyers can still meet their return thresholds,” he said.

Optimism Across the Board

The investment-focused panel was moderated by Steve Leathers, Senior Managing Director at Transwestern Healthcare Capital Markets, and included:

• Ben Appel, Vice Chairman, Newmark Healthcare Capital Markets
• Chris Morgan, Director of Acquisitions, Big Sky Medical
• Justin Shea, Principal, Hammes Partners

Leathers acknowledged that while investment volume remains below historical norms, “as a panel, we’re pretty optimistic” about the road ahead.

Appel of Newmark echoed the sentiment: “The demand has always been there. We’ve all just been waiting for the math to work again—and it’s starting to.”

Morgan of Big Sky Medical pointed to strong capital inflows: “After a three-year period where many investors were under-allocated to medical office, we’re seeing massive capital interest return.”

Public market strength, new fundraising, and a resurgence in portfolio deals are all contributing.

“Lenders want to lend again,” Morgan added, “and that’s shifting the market from being reliant on single-asset sales toward larger portfolio transactions.”

Lending Conditions Improve

Leathers asked about current borrowing conditions. Morgan reported that spreads have tightened.

“Last year, we were at mid-200 basis points. This summer, we closed a refinance deal at 180,” Leathers said.

This is a roughly 50 basis point improvement. Swap rates have also improved, lowering the overall cost of capital.

Morgan noted that Big Sky adapted during the slowdown by becoming more active across the capital stack—placing debt, equity (LP and GP), and managing both asset and portfolio transactions.

Why Are Sellers Coming Back?

Leathers asked: What’s motivating sellers to come back to market now? Appel said it varies by ownership type.

“Many long-dated funds have been holding assets they were ready to sell for 1–3 years. Now, with the capital markets more accommodative, we’re seeing that backlog start to clear.”

He added that public REITs are increasingly net sellers, while private owners—though accepting lower valuations than in 2021—are willing to transact.

“The good news is, demand is at least as strong, if not stronger, than the supply of quality assets,” Appel said.

Geography Still Matters—But Strategy Varies

When asked how geography plays into investment decisions, panelists had differing strategies.

Shea of Hammes Partners emphasized operational alignment.

“We have properties in 36 states. Our investment platform is an extension of our consulting work with healthcare systems,” said Shea. “That lets us confidently go into secondary and tertiary markets others may avoid.”

Morgan said Big Sky is “hyper-focused” on geography for value-add deals.

“We need population growth and density to support our business plan.” For core-plus deals, tenant quality becomes a larger driver. “We like the Southeast and states like Texas—high growth is our first check.”

Appel added, “Everyone needs healthcare. You can find strategic, mission-critical assets in both primary and secondary markets. What matters is aligning your strategy with the fundamentals.”

Cap Rates, Pricing Trends, and Market Segmentation

Appel and others noted that core MOB assets are currently trading at mid-5% cap rates, with more mixed portfolios blending into the mid-6% range. Value-add assets, particularly those tested in the market, are seeing more interest now that lending has returned.

“Woodside often prices each asset individually, even in portfolios. One might warrant a 5.5% cap, another a 9%, depending on market fundamentals like tenant demand and backfill risk,” said Barr.

“Hammes is seeing more development activity, especially with health systems sponsoring new projects,” Shea said. “We’ve never been busier. That’s helped us stay active, even while being more cautious on acquisitions.”

Development: Still Active, But Down Overall

Leathers noted that national healthcare real estate development has slowed, from about 20 million square feet per year to closer to 10 million in recent years.

But Shea said that a stronger buy-side market could support more development by improving exit expectations and reducing cost of capital.

“Yes, it helps developers underwrite more aggressively,” Shea said. “We’re not merchant developers, but we still watch cap rate trends to evaluate what a project could monetize for, even if it’s a long-term hold.”

Final Thoughts: Momentum Building

In closing, panelists agreed that the HRE market is finally regaining momentum.

“There’s just a lot more activity,” said Barr. “More deals, more confidence. I believe it’s going to get much stronger over the next year.”

Source: HREI