Vital Signs: 2025 Healthcare Update

Disinflationary Impact on Expenses NOI slowed through 2024.

MOB LEASING

• Decreasing inflation has resulted in a deceleration of expense growth through 2024. As of the third quarter, expense growth has slowed to 2.2% YOY, less than half the 5.5% posted a year ago during the third quarter of 2023. This reading is closer to the pre-pandemic, five year average of 1.6% for the period between 2015 to 2019. • Revenue growth is also feeling the impact of disinflation, as growth has decelerated from 2023 highs. Revenue growth of 2.3% YOY in the third quarter has fallen from its recent peak level of 3.7% YOY during the third quarter of 2023. Removing inflationary volatility, third quarter revenue growth is still slightly higher than the five-year average of 2.2% for the pre-pandemic period of 2015 to 2019. • Correspondingly, NOI growth has also decelerated, posting 2.2% YOY in the third quarter. This rate falls below the 2.6% average for the five-year, pre-pandemic period, indicating that expense management needs to accelerate to bring NOI closer to long-term averages. However, increasing labor costs continue to apply upward pressure on expenses, which makes this rebalance challenging.

6.0%

5.0%

4.0%

3.0%

2.0%

1.0%

Same Store Year-Over-Year Growth

0.0%

NOI Growth

Revenue Growth

Expense Growth

Source: Revista Med, Cushman & Wakefield Research

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