Healthcare Capital Markets 2025 Outlook

HEALTHCARE CAPITAL MARKETS 2025 OUTLOOK

Where will healthcare investment opportunities lie in 2025?

Howwill interest rates impact deal activity in 2025?

What will pricing look like in 2025?

Where is healthcare in the 2025 CRE cycle?

Whowill be the active buyers in 2025?

What can healthcare investors expect in 2025?

Howwill interest rates impact deal activity in 2025?

Transaction Activity Is Expected To Strengthen The Fed’s cutting cycle will progress cautiously

2024 Sales Volume Up 61% YOY

$35

6%

• Medical outpatient building (MOB) transaction activity tends to strengthen as interest rates decline. As financial market conditions loosen and the cost of capital improves, deal activity follows. • Deal activity picked up in 2024, with sales volume up 61% compared to 2023. This momentum is expected to carry into 2025, supported by strong fundamentals in healthcare properties. • The Fed has signaled a cautious approach to rate cutting, citing inflation risks. While the pace of rate cuts may be slower than previously expected the Fed projects another 50 basis points (bps) of cuts in 2025 and another 50 bps in 2026. • Although liquidity conditions were challenging throughout 2024 due to tighter debt availability and less active capital markets, the forecast is improving for 2025.

$30

5%

$25

4%

$20

3%

$15 Billions

$13

2%

$10

$8

1%

$5

$-

0%

2017Q1

2021Q1

2015Q1

2018Q1

2016Q1

2019Q1

2014Q1

2022Q1

2017Q3

2021Q3

2023Q1

2025Q1

2015Q3

2018Q3

2026Q1

2016Q3

2019Q3

2024Q1

2014Q3

2020Q1

2022Q3

2025Q3

2023Q3

2026Q3

2024Q3

2020Q3

MOB Sales-Rolling 4QTR

10-Year Treasury (RHS)

SOFR - 1 month (RHS)

Linear (MOB Sales-Rolling 4QTR )

Source: RevistaMed, U.S. Board of Governors of the Federal Reserve System (FRB); Moody's Analytics Forecasted

Note: Sales volume includes entity level transactions; 2024 sales data is preliminary

3

Lenders Are Eager To Deploy Debt Capital CRE lenders have grown more willing to lend as the outlook grows clearer

Origination Volume Increases

• The worst of the lender pullback appears to be over, with loan origination volume up 7.4% year-over-year (YOY) across major lender groups for all property types. However, 2024 volume still trails the 2017-2019 average by 25%. • Healthcare origination nearly doubled in 2024, however, like all property origination, lending in the healthcare sector lags the 2017-2019 average by 20%. • Improved investor and lender sentiment signals increased origination activity ahead as both groups gain confidence in the outlook and adapt to higher interest rates. • Although the Fed is expected to proceed cautiously with rate cuts, strong CRE healthcare fundamentals suggest lenders will find opportunities in the MOB sector, increasing capital availability for investors.

$900

120%

100%

$800

80%

$700

60%

$600

40%

$500

20%

$400

0%

$300

Billions

-20%

$200

-40%

$100

-60%

$0

-80%

Loan Origination-All Property Types Y/Y % Change in All Property Origination Y/Y % Change in MOB Origination

Source: MSCI Real Capital Analytics (data through November 2024); includes all sectors. Updated January 2025.

4

Whatwill pricing look like in2025?

All Property Pricing Improving MOB pricing shows positive momentum

Increased Clarity

• National all property pricing was down 0.5% YOY as of November 2024, a significant improvement from November 2023, when the index was down 7.4%. • On a price per square foot (psf) basis, MOB pricing rebounded in 2024, rising 4% YOY. Strong underlying fundamentals suggest pricing will stabilize further in 2025. • Going into 2025, increased deal activity will lead to clearer price discovery as the bid-ask spread tightens.

30%

30%

20%

20%

10%

10%

0%

0%

-10%

-10%

Change

-20%

-20%

-30%

-30%

Commercial Property Price Index* YOY

RevistaMed Price PSF TTM YOY Change

-40%

-40%

2017 2018 2019 2020 2021 2022 2023 2024

National All Property Apartment

Retail

Industrial

Office

MOB Price PSF (RHS)

Source: MSCI Real Capital Analytics, Cushman & Wakefield Research. Monthly CPPI data through November 2024 (updated January 2025). *The CPPI is a repeat sales index tracking same store property transactions.

6

Cap Rates Are Likely To Stabilize MOB cap rates have adjusted to higher interest rates

Finding Opportunity

9.0%

• MOB cap rates have increased an average of 159 bps from their 2022 lows, reflecting adjustments to higher interest rates. This makes them attractive compared to risk-free investments. Expected NOI growth coupled with lower capital costs from interest rate cuts will stabilize cap rates in 2025 avoiding the cap rate inflation seen in years prior. • On a trailing 12-month basis, cap rates were relatively stable in 2024, though quarterly data showed more volatility due to asset mix changes. Similar volatility is expected in 2025 as buyers and sellers seek clarity in pricing. • Following the close of 2024, the 10-year treasury rate has been as high as 4.8% before dropping back down to 4.5% range. If the 10-year treasury were to approach 5.0%, we could see upward pressure on CRE cap rates in general. • With the uncertainty of an election behind us, investor sentiment has improved for 2025. Risks remain, but despite policy and geopolitical uncertainty, the underlying fundamentals of the healthcare sector will continue to drive investor decisions.

8.0%

7.35% 7.29% 7.32% 7.09%

7.0%

6.0%

5.0%

4.27%

4.0%

3.0%

2.0%

1.0%

0.0%

1Q2021

1Q2019

2Q2021

1Q2022

3Q2021

1Q2023

2Q2019

3Q2019

4Q2021

1Q2024

1Q2020

4Q2019

2Q2022

3Q2022

2Q2023

3Q2023

4Q2022

2Q2024

4Q2023

3Q2024

2Q2020

3Q2020

4Q2020

4Q2024*

Revista TTM Avg Revista Weighted

Revista TTM Weighted Revista Avg

10-Year Treasury

Source: Revista Med (based on Top 50 Markets, 7,500+ sf MOBs), Cushman & Wakefield Research

*Estimated

7

Whowill be theactive buyers in 2025?

Top Buyers Likely To Remain The Same REIT M&A activity aside, private capital is driving the market

Finding Opportunities

• Private capital, consisting of developers, operators, institutional investors and real estate private equity (REPE) advisors, are expected to continue to be the most active buyer groups in 2025. • Hospitals, health systems and non-profits increased their annual buying activity, with sales volume higher in 2024 as those with the capacity to acquire took aim at more receptive sellers. • REITs have spent significant capital on acquisitions in the last 10 years. The bulk of their buying activity in 2024 consisted of the merger between Healthpeak Properties and Physicians Realty Trust. • Private investors were less active in 2024 compared to the previous eight-year annual average. Decreased activity was likely due to a drop in 1031 exchange opportunities.

$2.4

Developer/Operator - Inst

$2.1

REPE/Advisor

$0.6

Developer/Operator

$2.3

Hospital/Health System

$0.1

Non-Profit

$0.5

Investor/Private

$4.6*

REIT

$0.3

Provider

$0 $1 Billions Buyer Annual Average Investment Volume

$2

$3

$4 $5

$6

2024 2020-2023 2016-2019

Source: RevistaMed; Preliminary 2024 estimates; *2024 includes the Healthpeak/Physicians Realty Trust merger

9

Wherewill healthcare investment opportunities lie in2025?

Opportunities in Growth Markets Robust rent growth and high occupancy rates

Development Lags Demand

• Markets with high occupancy rates and robust rent growth present opportunity. • The high cost of new construction makes repositioning older assets in these markets an attractive way for buyers to capitalize on growth dynamics. • With a constrained construction pipeline, markets with occupancy rates below the top 50 average will likely experience occupancy increases in 2025, providing additional opportunities to investors.

96%

Hi-Growth

New York

Tampa

95%

Boston

Riverside

Miami

San Francisco

Seattle

94%

San Diego

Chicago

Baltimore

Atlanta

Minneapolis

93%

Philadelphia

Los Angeles

Top50

92%

Denver

Washington DC

91%

Dallas

Phoenix

90% 2024 Q4 Occupancy

Detroit

Houston

89%

Bubble size based on market inventory size

88%

-2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0%

2024 YOY Rent Growth

Source: RevistaMed, Cushman & Wakefield Research

11

Opportunity in Asset Quality Many markets with high rent growth and strong occupancy are currently trading below their 8-year avg price PSF

Repositioning Opportunity

• In 2024, many markets with high occupancy and strong rent growth saw assets trade below pre-pandemic, price-psf averages. • Some of this pricing is a function of lower than-average deal activity and the quality mix of assets that traded. • With tight occupancy in many of these markets and as the cost to build new buildings continues to increase, opportunities to reposition some well-located class B assets may arise. • According to Revista, as of 3Q24 the median, new construction cost in a high occupancy market like Boston was $365 psf, not including tenant improvement (TI) allocations. Boston reported an average purchase price of $224 psf as of 4Q24 on a TTM basis. • The discount is much larger in San Francisco, where the median new build cost is $1,206 psf and the sales price is $271 psf.

$800

$700

$600

$500

$400

$300

$200

Sales Price PSF (TTM)

$100

$0

4Q2024 2020-2023 Avg 2016-2019 Avg

Source: RevistaMed, Cushman & Wakefield Research

*New York 2016-2019 Avg off chart: $1,661

12

Where is healthcare in the2025CRE cycle?

Healthcare REITs Have Improved Still 4% below 2022 peak

Recovery Indicator

• REIT performance is a leading indicator for private CRE pricing trends. As REIT pricing improves and recovers, the outlook for private market CRE recovery strengthens. • Cross-sector REIT pricing has bounced from trough thresholds and is steadily recovering toward pre-rate hike levels. • Healthcare REIT pricing is 38% above its trough level and just 4% below peak 2022 levels, pointing to continued recovery in the sector. This tracks with the other alternatives sector, self storage, which is 7% off the 2022 peak.

170%

150%

120%

94%

70%

41% 38%

34%

34%

32% 32%

22%

20%

9% 7%

-30%

-80%

Peak to Trough Trough to Current

22 Peak to Current

Source: Dow Jones REIT Index, Moody’s Analytics and Cushman & Wakefield Research, updated January 2024.

14

Key Takeaways • MOB transaction activity rebounded in 2024 and is poised to grow further as interest rates decrease.

WHAT CAN HEALTHCARE INVESTORS EXPECT IN 2025?

• Pricing has rebounded from 2023 lows and is expected to grow further in 2025.

• Cap rates remain attractive relative to risk-free options.

• Developers, operators, institutional investors and real estate private equity (REPE) advisors are expected to be the most active buyer groups in 2025.

• Significant opportunities exist, particularly in high occupancy markets across the country.

• As CRE recovers, MOB will continue to be a preferred alternative asset class, supported by strong fundamentals and demographic drivers.

About Cushman & Wakefield

Cushman & Wakefield (NYSE: CWK) is a leading global commercial real estate services firm for property owners and occupiers with approximately 52,000 employees in approximately 400 offices and 60 countries. In 2022, the firm reported revenue of $10.1 billion across its core services of property, facilities and project management, leasing, capital markets, and valuation and other services. It also receives numerous industry and business accolades for its award-winning culture and commitment to Diversity, Equity and Inclusion (DEI), Environmental, Social and Governance (ESG) and more. For additional information, visit www.cushmanwakefield.com.

Gino Lollio Executive Director,

Travis Ives Executive Director,

Healthcare Capital Markets gino.lollio@cushwake.com

Healthcare Capital Markets travis.ives@cushwake.com

Tyler Morss Director, Equity Debt & Structured Finance

Lorie Damon Executive Managing Director Healthcare Advisory Group lorie.damon@cushwake.com

Healthcare Capital Markets tyler.morss@cushwake.com

Sandy Romero Head of Life Sciences & Healthcare Insights Global Research sandy.romero@cushwake.com

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