• Skip to main content
  • Skip to header right navigation
  • Skip to site footer
  • Blog
  • Free Resources
RevistaMed

RevistaMed

  • About
    • Meet Revista
    • Advisory Board
    • Partners
    • Press
    • Rising Leaders Council
    • Sponsorship
    • Contact Us
  • Events
    • 2025 Revista Medical Real Estate Investment Forum
    • Subscriber Webinar
  • Why Subscribe?
    • Revista x Pivotal
    • Featured Products
    • Business Development
    • Underwriting & Due Diligence
    • Asset Management
    • Capital Markets
    • Site Selection & Development
    • Leasing
  • Subscriber Login
Home / Industry News / Revista principals note that MOB sales, same-store NOI growth, are reflections of the sector’s steadiness

Revista principals note that MOB sales, same-store NOI growth, are reflections of the sector’s steadiness

February 28, 2019 by John B. Mugford Topics: Industry News, Revista News

SAN DIEGO– For the fourth straight year, medical office building (MOB) sales in 2018 topped $11 billion, providing another indication that the sector continues to garner strong demand from a wide and ever-growing number of investors and investor types.

The $11.2 billion in MOB sales recorded in 2018 represented a drop from the record-setting volume recorded in 2017, when the sales volume totaled $15.8 billion but was fueled, in large part, by Duke Realty Corp.’s disposition of its entire MOB portfolio for an estimated $2.5 billion.

And yet, despite the drop in sales, the MOB sector remains a modicum of steadiness, as indicated by the fact that the average, nationwide same-store net operating income (NOI) growth for MOBs stood at 2.4 percent in the third quarter (Q3) of 2018. The figure represented a slight decrease from recent quarters, when the average NOI growth peaked at 3 percent during a handful of quarters in 2016-17.

This information and other data concerning MOBs was presented during the “Medical Real Estate Industry Update” at Revista’s recent Medical Real Estate Investment Forum held Feb. 6-7 in San Diego. The fifth annual conference, which emphasizes data and continues to grow, attracted 375 attendees.

Presenting the material during the “update” were Revista Principals Mike Hargrave and Hilda Martin, who provided plenty of data highlighting a wide range of MOB fundamentals, such as occupancy rates, investment sales trends, development and construction numbers and other interesting information, such as a recent spike in hospital construction.

As a slide appeared on the big screens during the conference highlighted the steadiness of same-store, MOB NOI growth in recent years, Mr. Hargrave told the audience, “I would imagine this is why we’re all here,” adding that “NOI growth for MOBs remains remarkably consistent over the years, ranging from between 2 percent and 3 percent year after year, even coming out of the Great Recession.”

When it comes to MOB sales volume in recent years, Mr. Hargrave noted that “prior to 2014, when sales were $8.9 billion, the yearly totals were about $5 billion. But since 2015, the volume has topped $11 billion each year, meaning about 3 percent of the total inventory traded. That’s in line with other commercial real estate sectors and bodes well for the future of transactions in this industry.”

While MOB fundamentals remain steady year after year, Mr. Hargrave said that capitalization (cap) rates, or first-year expected yields, are starting to creep upward after a long period of record lows.

The average MOB sales cap rate in 2018 was 6.5 percent, up from an all-time low of 6.1 percent sustained from Q3 of 2017 to Q1 of 2018.

Interestingly, Revista’s data indicates that the rise in cap rates is being fueled by transactions involving what the firm considers “non-core” assets. For those sales, the average cap rate has risen from a low of 6.4 percent in Q3 2017 to 7.1 percent in Q4 2018.

On the other hand, cap rates for the top properties, considered by Revista to be “core” MOBs, have hovered right around 5.5 percent since Q2 2017.

Revista’s data also indicates that 874 HRE properties, with a value of about $70 billion were under construction as of the end of 2018. That includes a variety of project types, including MOBs, hospitals and others.

Mr. Hargrave noted that about 21 million square feet of new MOB space, with a value of about $9.4 billion, is slated for completion in 2019, about the same as in 2018.

“This is the story that we’ve been talking about year after year, the retailization of healthcare delivery and the need of the health systems to get out into the communities,” Ms. Martin told the audience.

She added that hospital construction, on the other hand, will see a large increase in projects, square footage and dollar value in 2019. Revista’s data shows that 39.3 million square feet of hospital space, be it in new facilities, replacement projects or expansions, with a value of about $28 billion, are scheduled to be delivered in 2019, making strong increases from recent years, including a 72 percent increase in square footage over 2017.

“All of these new hospital projects are, as we all know, contradictory to the recent conversation that the country needs fewer hospitals and fewer beds as the shift to an outpatient model continues,” said Ms. Martin.

“So why is this happening?” she asked rhetorically. “Well, one has to remember that the typical hospital project takes 731 days to complete from the groundbreaking to the completion. So, many of these were planned in 2014-15, in the early days of the ACA (Affordable Care Act), and there was a need to meet the demands of an aging demographic, a need to add new technology and a need to recruit more talent with new and better spaces.”

John B. Mugford is the editor of Healthcare Real Estate Insights. For more information on HREI – please visit HREInsights.com

John B. Mugford
Editor, newsletters at Wolf Marketing

Other Articles by John B. Mugford:

    • California deal breaks all-time MOB cap-rate record
    • 2021 was both the ‘Year of the Portfolio’ and the ‘Year of the Recapitalization’
    • A tutorial on how to improve upon a record-low cap rate

Previous Post:CPMC Van Ness Campus to Open March 2nd
Next Post:2018 Medical Office Sales Remain at High Level Total – Medical Office Investment Sales

Sidebar

Topics

  • Construction/Development
  • Industry News
  • Leasing/Property Management
  • Mergers/Acquisitions
  • Policy/Legislation
  • Real Estate Financing/Capital Markets
  • Revista Best Practices
  • Revista News
  • Sponsor Spotlight
  • Transactions
  • Uncategorized

Archives

RSS Recent Blog Posts

  • Limited Transaction Volume to Start 2025 April 29, 2025
    The preliminary 1Q25 numbers are in, and they show that transaction volume has been slow to kick off the year. $1.5 billion worth of MOBs traded in the 1st quarter, and $8.9 billion traded over the past year. This suppressed level of activity is . . . The post Limited Transaction Volume to Start 2025 […]
    Stephen Lindsey
  • A Look at 1Q25’s highest occupied Medical Office Market April 28, 2025
    That’s right!  With a 1Q25 occupancy of 96.9%, Asheville NC is the highest occupied market of the largest 125 metros RevistaMed tracks each quarter.  Asheville, which is still recovering from the effects of Hurricane Helene in September of 2024, can find strength within its healthcare market and within the MOB sector. The post A Look […]
    Mike Hargrave
  • Rising Rents for Newly Built MOBs March 31, 2025
    How have rising construction costs affected rents? Revista’s construction data continues to show increases in the cost of building an MOB. The average cost per square foot came in at $549 for completed MOBs in 2024. That is a . . . The post Rising Rents for Newly Built MOBs appeared first on RevistaMed.
    Stephen Lindsey
  • Cap Rates by Property Price February 28, 2025
    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 post Cap Rates […]
    Stephen Lindsey

Other Free Resources

Industry Directory

Search for and/or list your medical real estate services in Revista’s medical real estate directory.

Reports & White Papers

Download free reports & white papers on medical real estate.

Add Lease/Sale Listing

Revista provides free lease/sale listings for healthcare real estate.

Ready to Schedule a Demo?

Get in Touch Now
  • Why Subscribe?
  • Events
  • The MOB Scene
  • Add A Directory Listing
  • Add Lease/Sale Listing
  • Contact Us
  • Sponsorship
  • About
  • Data Terms of Use
  • Sponsorship Terms
  • Press

SIGN UP FOR MOB SCENE NEWSLETTER

  • Twitter
  • Facebook
  • LinkedIn