Vital Signs Fall 2021: Healthcare and Medical Office Report

VITAL SIGNS

As in 2020, private and REIT buyers have been more active than institutional buyers this year, with 50% of the deals going to private equity—although June and August 2021 did see an increase in institutional buyers. Several new-to-the-sector buyers have also emerged, entering through portfolio acquisitions or through partnership with a known operating entity. For example, Nuveen Real Estate’s recently acquired a 29-building national healthcare and life science portfolio from IRA Capital for $620M, giving its newly launched U.S. Cities Office Fund increased exposure to the healthcare sector. Investors have also begun to consider a broader range of healthcare uses and tenant types, including behavioral health tenancies, as they seek to place capital into the sector. MEDICAL OFFICE TRANSACTION ACTIVITY SHARE OF TOTAL (%)

50%

47%

43%

28%

28%

25%

21%

18%

15%

9%

7%

4%

3%

1%

1%

Private

Public

Institutional

User/Other

Foreign

'17-'19

2020

2021

Source: RCA, Cushman & Wakefield Research

MEDICAL OFFICE TRANSACTION ACTIVITY

2% 4% 1% 6% 2% 3% 7% 1%

0 100 200 300 400 500 600 700 800 900 Millions of Dollars

4%

8%

7%

19% 13%

25%

36%

41%

46%

37%

15%

51%

41%

7%

9%

5%

69% 63%

56%

53% 44%

39% 49%

36%

Private Public Institutional

User/Other

Private Public Institutional

User/Other

Source: RCA, Cushman & Wakefield Research

Cap rates have risen modestly from 6.2% in Q1 2020 to 6.4% in Q3 2021. The cost of fixed rate financing for medical office meanwhile has fallen significantly with the result that the spread between cap rates and cost of debt has widened from 206 basis points (bps) in Q1 2020 to a record 266 bps in Q3 2021.

8 | CUSHMAN & WAKEFIELD