Medical Office Buildings a Sound Investment, Despite Recession

In an environment where flat is the new up in the world of commercial real estate, medical office buildings are performing better than other properties.  In May, Industry Insights published two papers written by the Houston-based investment firm, Cain Brothers, which stated that this is a good time for health systems to sell real estate assets to raise needed cash.kaiser-_office_interior1-copy

Make no mistake, medical office building values are showing some slippage.  “We’re seeing values go down, but nowhere near what is going on with traditional office buildings,” said Tom Dalcolma, a partner in Street Sotheby’s Medical Realty Advisors.

A Real Capital Analytics study performed in May found that three percent of commercial office buildings were in bankruptcy, foreclosure or some form of distress.  Only one percent of medical office buildings were in similar straits.  Medical office building sales volume fell 20 percent over the past 12 months, compared with 51 percent for other office buildings.  The report concludes:  “Medical office properties have proven to be a safe haven, and this niche has little trouble.”

Interest in medical office buildings is growing because investors recognize that healthcare spending is not being impacted as harshly as the rest of the economy.  As minor medical procedures move from hospitals to offices, the demand for new facilities is increasing.  There were 600 million outpatient visits last year.  And that will only increase as the population swells by 45 million during the next 10 years.

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