A MOB or Medical Office Building is a property in which healthcare tenants reside. More and more investors are looking to cash in on the steady and reliable returns from this property type. With healthcare professionals occupying these buildings you find creditworthy tenants with leases typically running 10 years and who consistently draw foot traffic to their properties. These are a few reasons that drive investment of medical office buildings. According to Revista, investor demand for these, well-performing properties is high, and development is expanding with every state undergoing vigorous healthcare commercial real estate construction the last several years. A large percentage of these properties coming on line are being placed closer to neighborhoods, as the growth of patient-centric healthcare continues to evolve. These medical offices run the gambit of primary care centers which are usually under 10,000 SF to multi-tenant specialty centers of 75,000 square feet and up.
Stable cash flow can be expected. Even though new medical office buildings are coming on line supply is still low and demand continues to increase. Rates continue to increase as well. Yearly increases over these longer terms offers steady growth of the asset.
Medical office buildings offer recession proof tenants. Whether the economy is doing well or experiencing a down turn everyone eventually needs to see a doctor. The different healthcare professionals that can be located in a medical office building offers investors a varied assortment of tenants to select.
Retention of tenants is regular. With heavy build out costs, tenants prefer not to move. The lease term of a sole practitioner is often times ten years. Hospital tenants offer even more incentive in regard to credit worthiness and terms ranging from 15-20 years.
With stable demand from aging baby boomers and the recent increase of insured Americans, necessity of healthcare services will continue to grow. The aging of baby boomer peers will give way to a 75 percent increase in the number of Americans ages 65 and older from 1.3 million in 2010 to about 2.3 million in 2030. Since March 2015, Heath and Human Services reported a total of 16.4 insured due to Obamacare from Marketplace, Medicaid expansion, young adults staying on their parents plan, and other coverage provisions. With the increase in need for healthcare the need for providers will increase in turn giving way to lucrative investments in healthcare commercial real estate.
John Pollock, chief operating officer of San Ramon, California-based Meridian Property Co. conveyed “pricing and cap rates on transactions involving MOBs appear to be stable, and there’s high demand for strong assets with quality tenants”. Pollock also went on to say “with the increase in the newly insured and the desire to gain market share, we are seeing increased demand by health care systems and providers looking for well-located, accessible, visible locations to expand their services”.
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