Investor interest in senior housing remains strong, but there is another asset class that will also command the attention of healthcare real estate investors in 2015: the $300 billion market for medical office buildings (MOBs).
Though MOBs might not have been considered an accepted asset class 20 years ago, today some of the largest healthcare investors, senior housing included, have been actively cultivating portfolios specifically targeting these properties.
A sector with over $300 billion worth of assets presents considerable opportunity, especially as less than 15% of the sector is owned by institutional investors, said experts Thursday during Revista’s National Executive Forum in Chicago.
“Today, MOBs are a dynamic sector,” said Mark Engstrom, executive vice president of acquisitions at Healthcare Trust of America, Inc. (NYSE: HTA), also one of the leading sponsors of the event from Revista, a firm that tracks medical real estate data.
One of the firm’s principals is Michael Hargrave, former vice president and chief market and data strategist for the National Investment Center for Seniors Housing & Care (NIC). Unlike NIC, Revista focuses its data tracking services more on the acute care property side than on senior housing.
“The launch of this conference has been critical for us to bring our data to you today,” said Hargrave.
The company’s database includes over 51,000 “investment grade” properties across the continental U.S., including hospitals, MOBs, medical condo buildings, freestanding emergency rooms, as well as office buildings with medical components and retail buildings with medical.
Investment grade, as defined by Hargrave, are properties in excess of 7,500-square-feet. Of these property types, hospitals and MOBs control the largest share of asset classes tracked in Revista’s database.
Illustrating this, Hargrave notes there are more than 31,000 MOB properties in the database comprising over 1.2 billion square-feet, working out to an aggregate market value of approximately $315 billion.
“MOBs are a very large asset class and we’re pleased to count it up and put these numbers out there,” Hargrave said.
Though far less in number compared to MOBs, hospitals command more than 5,000 properties in Revista’s database, but they make up for this in terms of greater square-footage and value. With over 1.5 billion square-feet, hospitals tally an aggregate market value of approximately $569 billion. Doing the math, together these two asset types amount to about an $884 billion sector.
In terms of ownership on a square-foot basis, slightly less than 15% of the MOB sector is owned by institutional investors—9% owned by REITs and 5% owned by private equity investors.
“There’s a large network of regional developers that are very active—they total roughly 5%—but under 15% of the sector can be considered to be owned by these institutional owners,” Hargrave said.
The remaining 85% of the sector is owned largely by “users,” which Hargrave noted primarily as hospitals and health systems, as well as physician groups, the government and other owners making up the balance.
Looking ahead, data suggests that the MOB sector will continue to experience increasing interest in the coming year as they play a crucial role in the greater healthcare real estate market. And for investors this is a boon, especially now with a database from which to make informed decisions.
“We have long awaited a reliable, comprehensive property database and we believe Revista will shine a bright light on medical real estate,” said Engstrom.
Written by Jason Oliva