Will Medical Office Continue to Support Rich Deals?
Competition for Medical Office Properties Causing Buyer Yields to Edge Downward
July 20, 2017 | By Randyl Drummer | CoStar
As foreign investors, REITs and other institutional buyers rush to scoop up medical office building (MOB) space and develop urgent care and other ambulatory care facilities, the growing pool of buyers competing for a limited number of available properties is driving capitalization rates lower.
In an analysis of nearly 23,000 MOB sale transactions from 2008 to present, CoStar found that overall capitalization rates on sales of medical office properties across the U.S. of $10 million or greater, which had spiked to nearly 8.5% in early 2013, have gradually compressed as sales competition and pricing remain robust compared with the early years of the recovery. As of midyear 2017, national cap rates stood at a tight 6.2%, according to CoStar Analytics.
Although the overall average remained relatively unchanged last year, only deals with the lowest cap rates saw compression. In the most recently released reports by health-care consulting firm Revista, all tiers of transactions have seen compression.
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