Within the past year, the average cap rate on a medical office building transaction was 6.5%. This is up about 60 basis points from one year ago. The lack of transaction activity we have seen so far in 2023 is likely to continue, as the Fed just decided on an additional interest rate hike yesterday (July 26th). Many inflation indicators are showing great progress, with the CPI down to 3.0% on a year-over-year basis. However, the PCE Price Index has not moved down as rapidly and that is the Fed’s preferred gauge.
Until the interest rates become more stable, a lot of capital will remain hesitant. Pricing is likely to keep losing competitiveness while this happens. Revista will continue to monitor this trend, so stay tuned for updates.
