Rents and occupancies are up; second generation MOBs are performing well
By John B. Mugford
Although occupancy and absorption rates in the top 50 metro areas remain strong, rent growth is also accelerating. According to Revista’s data, year-over-year (YOY) triple-net rent growth was 2 percent in Q2 in the top 50 metro areas, matching the highest recorded rent growth since Q3 2019. (Slide courtesy of Revista)
With inflation on the rise and the cost of constructing new medical facilities continuing to escalate, who are the current and – at least for the near-term future – winners in the healthcare real estate (HRE) sector?
In many cases, the answer is: The owners of second-generation medical office building (MOB) space.
“Absorption of space has doubled” from mid-2019 to the second quarter (Q2) of 2022, according to Eric Johnson, executive managing director of the National Healthcare Advisory Services team with Houston-based Transwestern. “Construction starts (of MOBs) have been pretty flat, and that’s a trend that we’re seeing play out … in the sense that second-generation space is really kind of the winner right now. And that’s because of the time to market and the cost of construction…
“Rents are going to keep going up and the occupancy’s going to keep going up. That’s why we’ve got a 92 percent virtual (MOB) occupancy now (in the country’s top 50 metropolitan areas). And I think we’re just starting to scratch the surface, as I think these things are going to continue to go up pretty sharply from here.”
Mr. Johnson was a guest speaker during the recent Q2 Subscriber Webcast hosted on July 19 by Arnold, Md.-based Revista, a data firm that provides a wide variety of statistics on the HRE sector to its subscribers.
Transwestern’s healthcare team, Mr. Johnson noted, “is very diverse, from landlord reps to tenant reps in the healthcare space, as well as capital markets folks that just serve the capital markets community. Then we also have property management as well. We’ve got 160 professionals in 21 cities, spreading across the map pretty well nationally.”
The webcast was hosted by Revista principals Mike Hargrave and Hilda Martin had a heavy focus on MOB statistics during this time of inflation, which as alluded to by Mr. Johnson, has seen the occupancy rate reach
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