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Smaller MOBs Fuel Supply to Keep Up with Demand
posted on Nov. 21, 2019
Cap rates remain at all-time lows despite limited dollar-transaction volume in the third quarter. Significant variation in yields between regions is apparent.
The third quarter is historically a slow period of transaction activity, and Q3 2019 is no exception in terms of medical office building (“MOB”) dollar volume. In Q3, $2.7 billion in MOB transaction volume across 363 properties was recorded, compared with $3.1 billion across 300 properties in Q2.
During the first three quarters of 2019, 978 properties changed hands, marking the second-highest property volume over the past five years in that span. However, a look at the dollar volume recorded tells a different story: The $8.4 billion in MOB dollar volume recorded year to date is among the lowest in the past five years for this period.
With cap rates remaining at historical lows, these dynamics suggest that the average MOB transaction value through the first three quarters of 2019 is approximately $8.5 million, a 15 percent reduction from the three-year historic average of $10 million. The lower average pricing suggests that smaller MOBs are meeting the demand for investors when packaged with other MOBs into a portfolio.
