Firm Looks to Further Increase Investment Nationally in Sector it Expects to be Recession-Resistant
23 Aug 2022
CBRE Investment Management, on behalf of a fund it manages, has acquired a four-building medical office portfolio totaling 282,683 square feet in the coastal gateway market of Orange County, California, through a joint venture with Healthcare Realty Trust. The assets were part of the Healthcare Trust of America portfolio, which has merged with Healthcare Realty Trust to form the largest medical office building owner in the United States.
Located on the campus of a leading acute care hospital in affluent Mission Viejo, the portfolio includes Mission Medical Center Buildings 1-3 and Mission Medical Center Tower. These buildings, which recently underwent major renovations, feature ample surface parking, on-site pharmacies, recently renovated lobbies, new gurney-sized elevators, upgraded landscaping, and sustainability elements including new HVAC roof systems, LED lights and recycled water landscaping.
Medical office is a new strategy for our fund,” said Larissa Belova, Portfolio Manager, CBRE Investment Management. “Similar to the life science sector, the medical office sector is attractive because the aging population coupled with the world pandemic have increased spending on healthcare. Our strategy focuses on assets located within or adjacent to thriving hospital systems that create ecosystems that benefit doctors and their patients.”
Medical office has high barriers to entry due to the increasing complexity of the assets, resulting in an undersupply of state-of-the-art assets,” said Sondra Wenger, Head of Americas Commercial Operator Division, CBRE Investment Management. “Tenant retention rates tend to be higher because of the cost of tenant improvements and the need for a recognized location. This acquisition gave us an opportunity to gain immediate scale of historically strong-performing medical office building assets in a top cluster within the healthcare sector, and we are looking to increase our investment nationally in this sector that has performed well through market cycles.”
Medical office properties have proven relatively resilient with vacancies averaging about 2% lower than traditional offices as the work of medical practitioners often requires an in-office presence. For these reasons, medical office assets are expected to outperform the office market overall.
About CBRE Investment Management
CBRE Investment Management is a leading global real assets investment management firm with $146.9 billion in assets under management* as of June 30, 2022, operating in more than 30 offices and 20 countries around the world. Through its investor-operator culture, the firm seeks to deliver sustainable investment solutions across real assets categories, geographies, risk profiles and execution formats so that its clients, people and communities thrive.
CBRE Investment Management is an independently operated affiliate of CBRE Group, Inc. (NYSE:CBRE), the world’s largest commercial real estate services and investment firm (based on 2021 revenue). CBRE has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE Investment Management harnesses CBRE’s data and market insights, investment sourcing and other resources for the benefit of its clients. For more information, please visit www.cbreim.com.
*Assets under management (AUM) refers to the fair market value of real assets-related investments with respect to which CBRE Investment Management provides, on a global basis, oversight, investment management services and other advice and which generally consist of investments in real assets; equity in funds and joint ventures; securities portfolios; operating companies and real assets-related loans. This AUM is intended principally to reflect the extent of CBRE Investment Management’s presence in the global real assets market, and its calculation of AUM may differ from the calculations of other asset managers and from its calculation of regulatory assets under management for purposes of certain regulatory filings.
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