CALABASAS, CA- Research by Marcus & Millichap Real Estate Investment Services reports that many large medical practices and health systems are looking at real estate investments to cope with a changing landscape.
“The 2013 Medical Office Research Report” states that increasing operational costs and potential physician shortages are forcing health care providers to identify and exploit opportunities.
“From an investment perspective, health system mergers and acquisitions stand to elevate the overall credit characteristics of the nation’s medical office sector, resulting in additional high-quality acquisition opportunities, and potentially more favorable financing terms,” said a statement from Alan L. Pontius, managing director of the firm’s National Office and Industrial Properties Group. “While a shrinking tenant pool, along with ongoing pressure on reimbursements, may act as headwinds to rent growth in coming years, the lower-risk profile associated with hospital-grade tenants should counterbalance any impact on property prices and cap rates.”
Although Pontius was not available to amplify his comment, his statement also indicated that potential healthcare industry consolidation and an approaching wave of physician retirements will contribute to further divergence in property performance and values based on asset age, as large providers overlook many aging properties because of their inflexible designs.
Bill Hughes, Marcus & Millichap SVP and managing director of its Capital Corp. also stated that financing is “abundant for institutional-grade medical office buildings, such as performing on-campus assets and select top-quality off-campus properties affiliated with high-credit hospital systems.” Hughes also stated that commercial mortgage-backed securities (CMBS) originations in the medical office space increased 60% in 2012.
As reported earlier on GlobeSt.com, Hughes was also optimistic about prospects for apartment development in many markets.