Vital Signs 2022

MOB cap rates, which had in recent years compressed at a greater rate than other asset types such as office, reached a low point of a 5.5% national median in Q1 2022. As of Q3 2022, cap rates have increased to 6.00%. This rise is due, in part, to the increased cost and limited availability of debt, but it is also a reflection of the composition of deals that were brought to market. Owners of stabilized core holdings were more likely to hold rather than sell into a declining market. Not surprisingly, a larger percentage of core plus and value-add transactions raised the median cap rate by 50 basis points in just 6 months. Like many asset types, buyer pools for MOB have been constrained by lack of available debt. To some extent, Q3 2022 metrics are still representative of deal environments during Q1 and Q2, as many Q3 deals were awarded during this time span. Looking forward to Q4, further cap rate inflation is possible as rate hikes, recession concerns and geopolitical conflicts continue to affect pricing.

Cap rates for medical office buildings, which had fallen to a low of 5.5% at the beginning of 2022 have risen to 6.0%

Medical Office Cap Rates vs. Cost of Debt, Spread

8.0%

6.7%

7.0%

6.1%

6.0%

5.5%

6.0%

5.0%

5.3%

5.2%

4.0%

3.0%

2.0%

1.0%

0.0%

2021 Q1

2018 Q1

2019 Q1

2021 Q2

2022 Q1

2021 Q3

2018 Q2

2018 Q3

2019 Q2

2019 Q3

2021 Q4

2018 Q4

2020 Q1

2019 Q4

2022 Q2

2022 Q3

2020 Q2

2020 Q3

2020 Q4

Spread

Upper 25th Percentile

Median

Source: Revista Med, Cushman & Wakefield Research, RCA

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