2023 Outpatient Development Report Recap
When looking at all outpatient projects, Hammes developed the most with a count of 12, for a total of 769,658 sf.
When looking at all outpatient projects, Hammes developed the most with a count of 12, for a total of 769,658 sf.
Overall, Revista tracked 44.9 million square feet of outpatient developments in 2022, with 18.8 million (42%) being done by third-party developers
In partnership with Health Care Real Estate Insights (HREI), Revista has published their annual outpatient development report. The 2024 report covers all medical outpatient real estate developments that either broke ground or completed in the previous year . . .
What direction has the MOB market been going in 2024? In this article we are focusing on the Top 100 metro areas. The table below shows a snapshot of the changes observed for key metrics in the second quarter of this year. Inventory continued . . .
What level of sales activity are we seeing around alternative types of medical real estate?
The year of 2023 has brought significant drops in sales activity across the commercial real estate sector. The higher cost of capital is driving investors into cautiousness and the healthcare real estate market is not immune …
Typically, the transaction stats we look at are only for MOB trades that are at least $2.5 million. However, we do have data on a solid portion of the smaller deals. In the chart below we compare cap rates based on the property price, including those under $2.5M . . .
The average cap rate for medical office building (MOB) transactions moved up to 7% in the last quarter of 2023. This is up 90 basis points from one year prior. A pricing gap between on and off campus MOBs remains, with on campus coming in 30 basis points lower at 6.7%. Despite the strong underlying fundamentals, investor demand is being limited by stringent capital conditions . . .
Recently, the number of new construction projects has been low for the medical real estate industry. However, certain property types have been going against the current and have seen higher activity than usual. Two that stand out are . . .
With 23.4M for MOBs and 27.7M for hospitals, both are falling off the highs seen in 2022.
If we look at construction starts over the past year, we can see that a handful of markets have remained very strong despite increasing market headwinds. At a national level, annualized construction starts have been stable throughout 2022, hovering around 26 million square feet.
2023 was a slow year for medical office developments, with around 12 million square feet of projects that broke ground. This is about 45% lower than the average over the past decade. However, 12 million square feet is still a substantial increase in supply, and it is interesting to observe how different markets are reacting. In the graph below
The amount of new MOB construction has fallen since the peak in 2022, and the back end of 2024 was no exception. With right around 14 million sf breaking ground in 2024, the blue bar chart clearly shows 2024 had less than . . .
Recently there has been discussion about changing the term “Medical Office Building” (MOB) to an alternative that does not include the word office. In order to gauge our industry’s thoughts, Revista’s Rising Leaders Council (RLC) worked on a survey that went out last month, which had the following results:
Over the past year or two, new construction projects have faced the headwinds of elevated labor, material, and financing costs. Because of this, we are now seeing inventory growth running at a slower pace. The graph below shows the amount of MOB square footage that finished construction on an annual basis, as a percentage of the inventory. The average over the past 10 years is about . . .
Within the past year, the average cap rate for a medical office building was 6.5. This is up about 60 basis points from one year ago.
Recently we’ve been observing a downward trend, which has been reinforced by the current quarter. On a quarterly basis, 2Q23 only had around 2 million square feet start construction.
With the cost of construction materials continuing to rise, and interest rate hikes on the horizon, how will new MOB developments be affected?
If you have been staying up to date with Revista’s most recent construction data, you know that over the past few quarters, construction has been down across the board. However, the magnitude of the depression may depend on the characteristics of the project.
An inversion of the yield curve is a well-known indicator of a coming economic downturn. Using the difference between the 10-year and 2-year treasury spread, we can see that the …
Development and acquisition activity is currently suppressed in the medical office sector. However, this does not reflect a wavering in the underlying performance of medical assets. The graph below is from our 3Q23 Industry Fundamentals Report, which tracks a group of large medical office portfolios containing approximately 150 million square feet. It shows the average NOI per occupied square foot, which has continued to tick up, now at a level of $23.20.
If we take a look at the overall occupancy trends for the top 50 metros, we can see that a shallow U-shape has formed over the past few years. While this pattern shows a modest dip followed by a recovery, this may not be the story for individual metros.
Which regions have the highest rents? According to the following graph, which covers the largest metro areas across the U.S., the Pacific region is the outlier. In 2Q24, the Pacific had asking rents 29% higher . . .
Are MOB rents significantly higher when in close proximity to a hospital? To isolate the effect a property’s distance from the nearest hospital has on rent, we looked at a dataset of MOB’s that are not affiliated with a hospital, nor directly on a hospital campus.