Vital Signs: 2025 Healthcare Update

Cap Rate Compression in 2024 Pricing may have peaked in Q1.

CAPITAL MARKETS

• After a six-quarter run-up on capitalization rates, 2024 third-quarter cap rates have begun to compress. The third-quarter cap rate of 7.4% is 10 bps lower on a QOQ basis. However, this pricing is still 80 bps higher than a year ago. • The MOB cap rate spread to 10-year Treasurys pushed higher in 2024, outpacing the office sector, primarily due to decreased activity in office markets. • Expectations of lower interest rates in 2025 will likely result in an influx of capital to the sector. Lenders and investors who sat on the sidelines during the period of high interest rates are expected to reenter the market in 2025.

8%

700

7%

600

6%

500

5%

400

4%

300

Cap Rate

Spread (Bps)

3%

200

2%

100

1%

0

MOB Spread (RHS)

Office Spread (RHS)

MOB Average Cap Rate (TTM)

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

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