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Home / Construction/Development / Are Healthcare REITs Increasing Their Construction Pipelines?

Are Healthcare REITs Increasing Their Construction Pipelines?

September 25, 2017 by Mike Hargrave Topics: Construction/Development, Industry News, Policy/Legislation, Revista News

Recent history has shown that Healthcare REITs, as a group, have been generally reluctant to purse new development.  There have been exceptions, but market participants have argued that construction is generally viewed as riskier than buying stabilized assets and that such investments may not be immediately accretive to quarterly earnings.  It’s an argument that makes sense, right?

The new Revista 2016 Top 50 Owners of Medical Real Estate Report is showing that the Healthcare REITs (within the top 50 owners of medical real estate) are slowly showing signs of willingness to take on investments in development.

In 2013, the Healthcare REITs within the 2016 top owners report had funded roughly $0.5B worth of construction projects that were considered “in progress” at 12/31/2016.  That $0.5B represented just 0.7% of their total gross real estate assets.  But by 2016, the REITs had funded $1.5B worth of construction in progress which represented 1.3% of total gross real estate assets.

Now it is important to note that $1.5B worth of construction in progress is very small compared to overall total gross real estate assets of $113.1B.  And 1.3% (construction vs. gross RE assets) is materially lower than the hospital systems inside the top 50 owners who stand at 7.8% (as of 12/31/2016).

But the $1.5B has grown by roughly 3x since 2013.  Thus it does demonstrate that, as a group, the healthcare REITs are more willing to invest in development these days compared to a few years ago!

Construction in Progress

 

 

 

 

Mike Hargrave
Mike Hargrave

Other Articles by Mike Hargrave:

    • TTM MOB Cap Rate Trends Showing a 20-30 Basis Points (bps) Sequential Rise
    • Lenders to the Medical Office Sector Signaling Caution, Lower Volumes
    • Inflationary Pressures Impacting the Revista MOB Industry Fundamentals Report

Previous Post:MOB Sales Continue at Furious Pace in 2017
Next Post:Large MOB Portfolio Sales Often Fly Under the Radar

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