Real estate investors eye medical office building market

Despite confusion over healthcare reform, at least one group is taking advantage of the opportunities it brings. Real estate firms are investing in the medical office building market, Dallas/Fort Worth Health Daily reports.

According to the article, 124 medical office building properties were sold in the first half of 2013, in deals that totaled nearly $2 billion. In the average deal, a 74,750-square-foot property sold for $14.8 million. As detailed in a report from Chicago real estate management firm Jones Lang La Salle, medical office building and outpatient facility sales rose to $5.94 billion in 2012, breaking the previous record of $5.54 billion in 2006.  

Crain's Detroit Business reports an increase in the population over 65 years old is driving the demand for medical office buildings. According to the article, older demographics consume medical services at triple the rate of younger ones, hence the need for more office facilities.

According to Duke Realty executives Don Dunbar and Jason Sturman, medical office buildings appeal to third-party developers due to their longer-term leases, lower tenant turnover and higher rates of occupancy. "MOBs [medical office buildings] also are growing in popularity with providers, particularly those in off-campus locations," Dunbar and Sturman wrote in the July/August issue of Healthcare Finance News, "because they are less expensive to operate than inpatient facilities and they enable providers to be more competitive, providing improved, convenient consumer access to healthcare and growing their market share."

A 2011 study by economist Gary Shilling predicted the increase in demand. Shilling projected a 19 percent jump in demand for medical office space by 2019, largely due to baby boomers getting older and an increased focus on outpatient services and non-hospital treatments to keep costs under control. He also said the implementation of healthcare reform and an increase in the number of physicians directly employed by hospitals would spur continued growth, FierceHealthFinance previously reported.

To learn more:
- here's the Dallas/Fort Worth Health Daily article
- read the Jones Lang LaSalle report (.pdf)
- check out the Crain's article
- here's the Healthcare Finance News article