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Cover Story: The year of the portfolio

A surge in multi-asset transactions led to 2017 MOB sales records in volume, pricing, cap rates and more

By John B. Mugford

2017 MOB sales volume set another new record. MOB sales totaled $12.55 billion, according to RCA’s data. That topped the 2016 total of $10.21 billion by 22 percent. It also far surpassed the previous top best year, 2015, when sales totaled $10.26 billion.

Now is good time to offer a reminder of just how much the medical office building (MOB) sector has grown.

Fifteen years ago, at a time when MOBs were not on the radar of most of the country’s investors or commercial real estate professionals, real estate research firm Real Capital Analytics (RCA) Inc. issued its first full year of data concerning the sale of such facilities.

At the end of 2002, RCA’s data showed that 106 properties had traded hands that year for a total dollar volume of slightly more than $1 billion. The average capitalization (cap) rate, or the estimated first-year return on an investment, finished the year at an average of 9 percent.

Fast forward a decade-and-a-half and it is clear that the MOB sector has boomed.

Especially during the past couple of years, investors of all types and sizes – including publicly traded real estate investment trusts (REITs), private equity funds, fund managers and foreign capital – have become interested in owning a property type with a reputation for high tenant retention rates and the ability to perform well even during economic downturns.

The result has been an unprecedented growth in the volume of MOB sales. Since RCA compiled its first MOB sales data back in 2002, the four years with the highest dollar volume totals have been the past four: 2014-2017.

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