Vital Signs: Medical Office Buildings Capital Markets Update

From 2020 through the beginning of 2022, capital markets activity for medical office buildings (MOBs) saw significant growth in both transaction volume and pricing, spurred by a confluence of factors. Rising rents and occupancy, coupled with interest from a broadening spectrum of institutional investors, contributed to this growth in transactions. In addition, ongoing secular demographic drivers of healthcare coupled with the exogenous event of the COVID-19 pandemic prompted many institutional investors to become new entrants into the MOB market. Over the past year, however, capital markets across commercial real estate asset classes have been impacted by rising interest rates, limited lending and caution over the slowing of key economic indices. Medical office has not been immune to these factors, with transaction volume slowing and cap rates beginning to expand. While other asset types have been more adversely affected along key indicators like vacancy and rents, medical office buildings remained resilient. As a result, the sector continues to draw interest from investors and will likely see a growth in transaction activity when debt and equity markets feel comfortable enough to reinitiate acquisitions.