Business Trends

Medical Office Buildings in Era of Obamacare, by Cushman & Wakefield

File Type: Free Content, Article
Release Date: August 2013
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Dreyer Medical Clinic

Cushman & Wakefield (C&W) has released its 2013 Medical Office Building Investor Survey. C&W surveyed lenders, real estate brokers and investors on subjects such as capitalization and internal rates of return (IRR), as well as current trends and overall market conditions. The biggest event, naturally, was the passage of healthcare reform in 2010 and its affirmation by the U.S. Supreme Court in 2012. Now, the initial phases of healthcare reform have begun, but as several healthcare reform observers have told C&W regarding the uncertainty created by the act, the more things change, the more they stay the same.

Market conditions for medical office buildings continue to remain robust since the issuance of the 2012 Investor Survey (May 2012). Financial markets, healthcare demographics and medical office investors are upbeat regarding MOBs as an asset class overall. In addition, the MOB investment arena continues to outperform other sectors of the commercial real estate market. Strong leasing fundamentals, coupled with plentiful capital chasing a limited supply of product continues to be the primary drivers fueling aggressive pricing for good-quality medical office properties.

According to the C&W survey, health systems are continually looking at ways to efficiently utilize existing space, increase market share by adding strategic off-campus ambulatory locations, acquire physician practices, and form strategic partnerships or joint ventures. Set against a limited capital budget for real estate, new medical office development has slowed somewhat according to several medical office developers. While health systems continue to be open to developing or adding new medical office space, timelines for developing new medical space are also being stretched.