GlobeSt.com caught up with Toby Scrivner, senior director of Stan Johnson Co., about net-leased healthcare facilities and about continued growth in the industry. But he did have one warning about certain facilities.

GlobeSt.com: What advice are you giving your clients on net-leased healthcare facilities?

Toby Scrivner: We like the continuing growth of the industry. Demographics are placing further demand on healthcare infrastructure, but we're sensitive to changes in technology and the administration of delivery. We're sometimes cautious of products like oncology facilities, where so much of the value is tied up in the technology. Overpaying today could put you in a precarious position if the technology becomes obsolete down the road.

GlobeSt.com: Do you see much cap rate movement for single-tenant medical product?

Scrivner: In healthcare facilities across the board, we've seen continued cap rate compression over the past 36 months—three to five basis points per month, lately—despite interest rate increases. That's a testament to the lack of available product. Average cap rates are currently below seven percent.

GlobeSt.com: Do you see any exceptionally bright spots in the sector, or a property subtype that's in high demand?

Scrivner: Product that's on or adjacent to a hospital campus is especially attractive. The synergy lends itself to long-term value. Even if a tenant vacates, there's always an alternative service that will be interested in the space. Much of the action is occurring in the Southeast, due to population migration—especially in income-tax-free states, where we see competition among traditional, passive, and 1031 investors.

Instant Insights /

Demographics Place Further Demand on Healthcare Infrastructure

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