Minneapolis is not even in the top ten metros when it comes to total number of medical properties in a market. In fact, it’s ranked at 13. Yet this unassuming market is number 2 in terms of outpatient building deliveries and 4th for total deal volume. Even rent growth has been consistently surpassing the national average. What gives?
Unlike Atlanta and Houston, population growth is not necessarily the star of the show. Minneapolis has only shown modest growth over recent years and 2017 was the first year since 2010 that more people moved to Minneapolis than away. Previously, growth was almost entirely from births outpacing deaths. However, health systems and providers in the market are nimble and innovative; rising to meet the specific needs of the local demographic and keep up with the ever-changing landscape of demand and reimbursement. Case in point – growth is from a positive birth rate? Well, quite a few birthing centers have opened recently. Allina Health has opened 3 new “Mother Baby Centers” on their hospital campuses and Regions Hospital is seeking approval for a new birth center in St Paul. Allina health has also recently opened a number of community clinics in an effort to provide greater access to services closer to where their patients live.
It’s all just data though until you talk to someone with boots on the ground. Davis Real Estate is one of the most active developers in the region with a strong focus on the twin cities area. Mark Davis says “Minnesota has some of the most prominent and dynamic healthcare players in the United States. Many of these healthcare providers have been willing to spend their time and capital to keep their facilities updated. This, paired with positive economic conditions and rental structure has allowed Minnesota to become one of the strongest states for HC development in the nation.”
In the U.S. the average MOB was built in 1988. In Minneapolis, the average is 1993. So while the metro may not have staggering demographic growth, providers are on top of trends and keeping their facilities up to date which translates into higher rents and greater investor interest.
Speaking of which, investors love the twin cities. Harrison Street made Minneapolis a New Year’s resolution and bought a large portfolio of medical office properties from IRET almost entirely centered in the midwestern metro. A number of REITs are buying in as well – Physicians Realty Trust, Healthcare Realty Trust and Seniors Housing Property Trust have all made investments there recently. In fact, of all the outpatient space in Minneapolis, almost half (49%) is owned by investors. Versus an estimated 30% across the whole country. Interested in the stats for your metro? Subscribe to Revista!