The Healthy Net Lease Asset Class

Jon Hipp

The medical sector is one of the quieter, more under the radar property types within the net lease world. Though not as abundant as dollar stores or ubiquitous as fast food; medical net lease properties offer investors steady cash flows, low-to-no management burden, and cap rates which beat out other similarly sized deals. Furthermore, an aging demographic shift will help ensure this asset type remains a viable investment well into the future.

Dissecting the Sector

For the purposes of this analysis we’re defining the medical sector as the service industry that provides healthcare services to the retail public. We’re excluding from this however, the dialysis providers and actual hospitals as they really require their own separate analysis. We’re limiting ourselves here to primary care physicians, specialty medical practices, eye doctors, dentists, urgent care, and plasma donation centers. Most of these businesses operate out of free-standing facilities or end caps in retail/mixed-use centers, generally in highly trafficked areas.

Calkain’s recently released Medical Sector Net Lease Report 2019 noted a cap rate increase to 6.99% from the 6.82% cap rate reported in late 2018. This increase is pretty modest.