Projects like the 124,000-SF Facey Medical Group Clinic contributed to an MOB development rebound in 2012.

As Healthcare Real Estate Insights (HREI) continues its review of the top 10 trends of 2012, here are numbers 4-7:

7. MOB Development on the Rise?

The heyday of medical office building (MOB) development was 2007-08, when roughly 24 million square feet of new space was delivered annually. Since then, development declined steadily – until 2012, that is. Marcus & Millichap estimates that about 8.5 million square feet of MOB space was completed last year. While that’s a far cry from the go-go years, it certainly tops 2011, which saw about 5.7 million square feet of new space. Sector professionals are mixed on whether 2013 will see another substantial increase. One good sign, however, is that the nationwide MOB vacancy rate dropped to 10.2 percent by the end of 2102, down from the 2009 peak of more than 11 percent.

6. The Rise of the Non-Traded REITs

Although publicly traded healthcare real estate investment trusts (REITs) are more likely to grab headlines with blockbuster acquisitions, 2012 demonstrated that there is still plenty of room for private, non-traded healthcare REITs. When Newport Beach, CA.-based Griffin-American Healthcare REIT II acquired six healthcare buildings in late 2012, the private REIT reached quite a milestone with its portfolio: $1 billion in value, based on purchase price. By mid-January 2013, the value of the REIT’s portfolio stood at $1.3 billion. Other private REITs have also popped up recently in the healthcare real estate sector. Andl local REIT Healthcare Trust of America grew so large that it went public in June, and is now listed on the new York Stock Exchange under the ticker symbol HTA.

5. Scads of New Money – and Old – Earmarked for MOBs

As some other commercial real estate sectors continue to struggle – multi-family notwithstanding – more and more investors have earmarked capital for acquiring healthcare properties. Many of these investors are large entities, such as life insurance companies or pension funds, partnering with experienced healthcare real estate firms. Examples include a partnership of Rockville, MD-based Foulger-Pratt Cos. and Prudential Real Estate Investors; and a partnership of Santa Barbara, CA-based Montecito Medical Acquisition Co. and Boston-based Berkshire Realty Ventures. Numerous other funds and partnerships have been formed, meaning hundreds of millions of dollars stand ready to be invested in healthcare properties. The only question is: Will there be enough supply to satisfy demand?

4. Cap Rates Remain Low, Prices High

With so much capital chasing MOBs, it certainly makes sense that pricing remained strong and cap rates stayed low throughout 2012. According to preliminary data from real estate research firm Real Capital Analytics (RCA) Inc., the average cap rate for MOB sales of $5 million or more was likely to going to be less than 7 percent in Q4 2012. For the year, the average cap rate will probably be in the high 7 percent range. The reason? As noted above, a lot of money is chasing a limited supply of the most desirable MOBs, those affiliated with major health systems.

John Mugford is the Editor of Healthcare Real Estate Insights, the nation’s first and only publication totally dedicated to covering news and trends in healthcare real estate development, financing and investment. For more information, please visit