Investors in healthcare buildings view multi-tenant medical offices as their best bets for returns on investments whose financing, to an increasing degree, leans toward cash rather than debt.
Those are some of the findings in a 15-page report that CBRE’s U.S. Healthcare Capital Markets Group has released, based on responses from 80 healthcare real estate investors answering 26 questions. The largest group of respondents (32%) was healthcare real estate developers, followed by healthcare REITs and private capital healthcare investors (27% each).
Nearly one-third (32%) of all respondents say they target transactions that fall between $20 million and $50 million. Another 31% say that their preferred transaction range is $10 million to $20 million. Nearly all of the respondents—96%—are most interested in medical office buildings as the type of building that meets their acquisition criteria. The next preferred building type is ambulatory surgery centers (63%), wellness centers (41%), and assisted living facilities (39%).
Single-tenant medical office buildings are pricing the most aggressively.
The largest group of respondents (37%) indicate a cap rate range of 6% to 6.49%, and another 42% indicating a cap rate lower than 5.99%. In contrast, more than one quarter of respondents indicates a cap rate of 6% to 6.49% for ambulatory surgery centers, while 31% indicate a cap rate range of 6.5% to 6.99% for wellness centers, and 33% a 7% to 7.49% range for acute care hospitals.
The product types with the least-aggressive pricing, according to the survey’s respondents, are long-term acute care hospitals, skilled nursing facilities, and psychiatric hospitals.
The vast majority of respondents—82%—say their medical office investments this year would make them “net buyers.”
Majorities of respondents expect supply of and demand for healthcare sector buildings in general to remain pretty much the same this year as in 2015, with some intriguing collisions: for example 30% of respondents think demand for freestanding emergency departments would be higher even as 40% expect supply of that product type would be lower.
Rents for medical office buildings were up between 2% and 3% for the respondents’ portfolios, and none is predicting much growth beyond that in the next 12 months, which is curious given that 59% of those surveyed say their portfolio’s occupancy rates were higher than the year before.
Source: INDUSTRY RESEARCH | APRIL 07, 2016 | JOHN CAULFIELD, SENIOR EDITOR