Overall, MOB cap rates have continued to remain at lower levels compared to just a few years ago. According to Revista’s 3rd Quarter, 2019 Medical Real Estate Transactions Report, the US MOB average cap rate 6.4% which was down slightly from 6.5% in 3Q18. While the trends are relatively steady for the overall average, there is some movement to see when you dig into the trends.
One way to look at cap rates is to compare properties that trade as a part of a portfolio compared to properties that trade as a single asset. Cap rates on properties that trade at as part of a portfolio continue to trade at a premium compared to single assets. The average “portfolio” was 6.2% in 3Q19 which was down from 6.5% in 3Q18. No doubt the portfolio cap rate was influenced by Welltower’s acquisition of CNL Healthcare Properties which carried a reported cap rate of 5.7%.
Single property cap rates, however, are moving in the opposite direction. The single property cap rate was 6.8% in 3Q19 which was up 40 basis points from 6.4% in 3Q18. What is driving the rise in cap rates for single properties? It is most likely the mix of properties that are trading. There have been fewer single trophy MOBs that have traded in 2019 compared to 2017 and 2018. Revista will continue to monitor this trend.