Q3 M&A Update: Hospital M&A Activity Continues to Lag
Oct. 1, 2021 — Data from the H2C Securities Inc. ("H2C") mergers and acquisitions ("M&A") database shows 7 hospital transactions were announced in Q3 2021, bringing nine-month YTD volume up to 43. This represents a 30 percent decrease over YTD 2020, and lower volume than the YTD average of the past 10 years of approximately 65.
Although Q2 sales volumes lagged previous years, prices per square foot and capitalization rates have held strong throughout the first half of 2021 due to investment-grade, credit-rated health systems. The second quarter of 2021 saw $2.4 billion in sales volume in the medical office building (“MOB”) sales market across 92 transactions encompassing 273 properties, an H2C Securities Inc. (“H2C”) analysis shows.
Medical Office Buildings Keep Outperforming the Market in Rent and Price Per Square Foot
Strong Demand and Limited Supply Create Window of Opportunity in Medical-Specialty Assets and Value-Add Medical Office Buildings
The first quarter of 2021 saw $1.8 billion in sales volume in the medical office building (“MOB”) sales market across 149 transactions encompassing 233 properties, an H2C Securities Inc. (“H2C”) analysis shows.
Medical Office Building Values Resilient Through Volatile Year
Few asset classes have demonstrated the resiliency that medical office building (“MOB”) values have shown in 2020, a year that was unlike any other due to the impact of the COVID-19 pandemic. An H2C analysis shows that while COVID-19 decimated valuations of hotel properties, retail, and senior housing, average cap rates for MOBs hit an all-time low of 6.57 percent, while average price per square foot exceeded $300 for the first time.
Rightsizing Your Lease Agreements: Options for Healthcare Leaders
Even before the pandemic, many hospitals and health systems found themselves in unfavorable lease arrangements. These agreements, which often were structured several years ago, have exceeded market rental rates, prevented healthcare organizations from leaving undesirable space, and allowed competitors to move in nearby.