2021 Recap and Biggest Trends in Healthcare Real Estate
The H2C Securities Inc. (“H2C”) real estate investment banking team (“REIB”) capped off 2021 having advised on nearly $400 million in transaction volume, with more than $1.1 billion in transactions over the past 24 months.
Portfolio Sales Drive $12.6B Transaction Year and Record-Low Cap Rates for Medical Office
Medical office building (“MOB”) sales volume topped $12.6 billion in 2021, eclipsing the prior year’s annual volume and resulting in a record-low average cap rate for MOBs, an analysis by H2C Securities Inc. (“H2C”) shows (1). The transaction volume was primarily driven by an increase in large-portfolio transactions, 13 of which were over $75 million in total value and consisted of more than six properties for 2021.
Q3 MOB Report
Although Q3 sales volumes nearly doubled year-to date total sales volume, the vast amount of health system MOB development highlights the unmet demand for modern medical office spaces.
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.
Medical Office Buildings Keep Outperforming the Market in Rent and Price Per Square Foot
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.
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.
Did Capitated Revenue Give Health Systems an Edge During the Pandemic?
H2C Analysis Suggests ‘Yes’
As volumes for hospitals and health systems fell throughout the pandemic, rating agencies speculated that organizations with capitated revenue from provider-sponsored health plans (“PSHPs”) and or capitation agreements would benefit from financial stability . The reason: Even as these organizations faced decreased revenue from postponed elective procedures, such pressures would be balanced by the cash flow of their PSHP, projected to reach all-time highs.
MOBs Set Record for 12-Month Sales Volume and Pricing
Medical office building (“MOB”) sales volume topped $3.3 billion in the first quarter of 2022 and $16.8 billion since Q1 2021—a 12-month gross sales volume record for MOB sales (1). First quarter sales volume was 78 percent higher than in Q1 2021 as investors seemingly rushed to acquire and recapitalize assets utilizing fixed-rate leverage prior to interest rate hikes. The record transaction volume resulted in record-low average cap rates for MOBs, which reached 6.14 percent over a trailing 12-month period.
Consistent MOB Sales Activity - But Will it Slow Down?
Medical office building (“MOB”) sales volume topped $3.0 billion in the second quarter of 2022 and average cap rates matched the all-time low average cap rate set in Q1. There was consistent transaction volume in Q2, which brought annualized volume to $17.4 billion, a 12-month gross sales volume record for MOB sales.
Strategic M&A Shapes Healthcare Deal Activity in 2021
Hospital and health system mergers and acquisitions reached their lowest point in over a decade in 2021, but there was no shortage of creative thinking across sectors as organizations sought to take advantage of strategic opportunities in a rapidly evolving environment.
HR/HTA Closing Drives Record Quarter for MOB Pricing
Medical office building (“MOB”) sales volume topped $7.0 billion in the third quarter of 2022, the largest quarterly sales volume in over 15 years, and average cap rates matched the all-time low average cap rate set in the first half of 2022. The immense transaction volume in Q3, which brought annualized volume to $19.7 billion, was a 12-month gross sales volume record.
Big Decline in Q4 Transaction Volume Caps $17.1B Year
Medical office building (“MOB”) sales volume in the fourth quarter of 2022 was $3.0 billion, a sharp decline from the third quarter’s record quarterly sales volume of $7.7 billion. The fourth quarter, which is typically one of the more-active periods each year for transactions, saw the lowest sales volume since 2015 and the least number of buildings to transact since 2012 with just 260 properties changing ownership.
First Quarter Marks Lowest MOB Quarterly Transaction Volume In Over A Decade
Medical office building (“MOB”) sales volume in the first quarter of 2023 was $1.5 billion, nearly a 50 percent decline from the fourth quarter of 2022 quarterly sales volume of $3.0 billion. The first quarter, which is typically one of the less-active periods each year for transactions, saw the lowest sales volume since the first quarter of 2014 and the least number of buildings to transact since 2019 with just 236 properties changing ownership.
