ATLANTA, GA (May 7, 2012) – While some commercial real estate property sectors are struggling to recover from the Great Recession, the market for medical office buildings has and will continue to remain healthy.
That was the opinion of host Michael Bull (top right photo) and his guests on the latest episode of “America’s Commercial Real Estate Show.” The episode provided an in-depth look at the healthcare real estate market.
“[The medical office sector] is still considered a safe haven,” said Paul Zeman (top left photo), a partner with Bull Realty’s Healthcare Real Estate Services. “In my opinion, it’s one of the strongest sectors in commercial real estate.”
Investment interest in medical offices is almost as strong as ever, said Dan Fasulo (middle right photo), managing director of Real Capital Analytics. “We did more than $3 billion worth of transaction activity in 2011, and while that’s not peak-level activity, which we recorded in 2006 and 2007, we’re not too far off,” he said.
“It tells me there’s tremendous demand for [medical office buildings],” Fasulo added. “All you’ve got to do is look at the demographic charts to get excited about the potential for medical office and the related facilities. We have a lot of the population heading toward the part of their lives when they need the service providersthat are going to be in these types of buildings.”
Cap rates have compressed significantly during the past two years, and the nationwide average is just above 7 percent, according to Fasulo, who quickly noted the rates can vary widely depending on the area and property type.
Also, even though the fate of the sweeping federal healthcare law is unclear, medical tenants are not letting the uncertainty keep them from pulling the trigger on long-term leases, observed Shane Seitz (lower left photo), vice president of investments for Ventas REIT, which owns or manages 21 million square feet of medical office properties.
“Within the last few months, we’ve seen a [leasing] uptick where physicians are finally saying, ‘We need to lock up our space. We need to know that we’ve got a good space to practice for the long term. Whatever happens, happens … Let’s just get our space taken care of and move forward,’” Setiz said.
In more good news, Michael Bull, also the founder and president of Bull Realty, noted the lack of new construction could set the stage for a big jump in the value of existing medical office properties.
“I think in this and in a lot of sectors, five years down the road, we could be surprised at what could happen to values,” he said. “At least I’m hoping – I want to be doing the ‘Snoopy dance’ in about five years.’”
The next “Commercial Real Estate Show” will be available May 10 and will look at the market for single-tenant net-leased properties.
Contact:
Stephen Ursery
Wilbert News Strategies
E-mail: sursery@wnspr.com
Office: (404) 965-5026
Cell: (404) 405-2354
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