Average medical outpatient building (MOB) cap rates have increased for five consecutive quarters, ending Q4 at 6.9%, according to CBRE’s Q4 report on the asset class.
The average cap rates steadily declined between 2020 and most of 2022 before increasing by 80 basis points between Q3, 2022 and Q4 2023.
“From a general occupancy perspective, medical office is relatively stable,” Joe Euphrat, Managing Principal, GreenRock, tells GlobeSt.com.
“Healthcare needs continue during any market environments. Medical offices, though, are not immune to the affects in the market. Price impacts have occurred due to increases in cap rates, close to 7.0% today.
“Access to debt also has affected both the sale activities of MOB and development of new medical office buildings.”
MOB asking rent growth has far outpaced that of traditional office buildings since 2020, mostly the result of heightened patient demand for healthcare services. Its annual compound growth rate since Q4 2019 is 2.7%.
Average MOB triple net asking rent increased by 0.4% year-over-year to $23.66 per square foot.
Additionally, medical outpatient building investment continues to increase. Volume was up by 15% quarter over quarter in Q4 2023 by $2 billion bringing the full-year total to $7.1 billion.
Sunbelt markets in the Southeast and Southwest accounted for 47% of all MOB investment volume in 2023 with Los Angeles the top MOB investment market with $448 million. It was followed by Washington, DC, with $425 million, and Atlanta with $406 million.
Houston was the top market for MOB absorption and Q4 with 780,000 square feet, followed by Chicago with 500,000 square feet and Minneapolis with 270,000 square feet.
MOBs traded at an average of $287 per square foot in Q4, marking the sixth consecutive quarter it declined after it peaked at $356 in Q2 2022. Such declines follow the trend of the broader office market, according to CBRE.
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