They can feature extensive amenities and full tenant fit-outs, or they might be simple properties geared toward single tenants, like a primary care physician or dental office. The average cap rate for individual MOB sales dropped to 6.61% during this same time (dipping below the previous record lows of 6.7% in Q3 2016). Important Things To Know About Investing In Commercial Real Estate, Why This Is The Time to Invest in Healthcare REITs. Anyone looking to develop or otherwise significantly invest in their medical office building will survey the need to ensure that the money they plan to spend on the project can be supported by current market rents. Recent U.S. Office MarketBeats. At the other end of the spectrum is Class C medical office, which is older buildings (perhaps 1970s or 1980s vintage) that likely have lower ceilings, fewer windows, and more occasional patient and employee amenities. As with any investment, MOBs offer unique opportunities and considerations. Shopping centers continue to appeal to medical clinics seeking to increase market exposure and accessibility. Today, the medical office has emerged as a darling among. There are also costs, like ongoing property management, that should be factored into a prospective investors budget before moving forward with a deal. A medical office is a great option for risk-averse investors, given the industry's strong underlying fundamentals. Moreover, in Q4 2020, the average price per square foot of medical office transactions was 3.7% higher than in Q4 2019, which proves that medical office is resilient even in the wake of widespread economic turmoil. Today, the medical office has emerged as a darling among commercial real estate asset classes. Landscape version of the Flipboard logo . The sectors resiliency, as well as strong underlying fundamentals, has increased investor appetite for healthcare-related real estate. That doesnt mean that MOB properties are any less nuanced today than they were pre-pandemic. But prior to that, there was a gap. Investing in securities or real property investments (the ""Investments"") listed on EquityMultiple pose risks, including but not limited to market risk, credit risk, interest rate risk, and the risk of losing some or all of the money you invest. MOB space under construction as a share of inventory is highest in Atlanta at 6.1%, followed by Miami at 5.9% and Washington, DC at 5.2%. Class A medical office buildings tend to be newer with modern-day layouts, systems, and amenities. By co-locating in a more traditional retail environment, healthcare providers gain greater visibility, better access, and branding opportunities that give them a competitive advantage over those located in more isolated suburban office parks. Concerns about the economy are top of mind for most global real estate leaders as they prepare for the remainder of 2022 and 2023. Medical office space is as diverse as the healthcare industry itself. In the third quarter, CoStar (a commercial real estate database) MOB rates averaged a slight decline with average asking net rates of $22.30 per square foot (PSF). Overall, the future of multifamily looks bright, with a couple notable exceptions. According to CoStar, a commercial real estate database, MOB asking rents average around $22.30 per square foot (NNN). Available office and lab real estate in Boston Q2 2022, by district and type; The most important statistics. People have grown accustomed to receiving treatment and other healthcare services in a hospital-like setting. Consolidated Financial Results Overview The following table presents highlights of CBRE performance (dollars in millions, except per share [], Posted in Breaking News, Capital Markets, Companies & People, ROCHESTER, N.Y.(BUSINESS WIRE)Broadstone Net Lease, Inc. (NYSE: BNL) (BNL, the Company, we, our, or us), today announced its operating results for the quarter and year ended December 31, 2022. In Boston, a market known as one of the strongest in the life sciences segment, laboratory vacancy rates are about 1.7%. Net income attributable to common stockholders was $13.3 million, or $0.20 per diluted share, as compared to $11.8 million, or $0.19 per diluted share, in the comparable . According to Emerging Trends in Real Estate 2022, there will be new opportunities in both urban and suburban markets, with Sun Belt metropolitan areas like Austin, Miami, and Phoenix leading the way. The sheer variety of medical office properties is what makes the space so compelling from an investment standpoint. In 2022, we can continue to expect technology to be at the forefront of healthcare delivery. Al Brooks, Head of Commercial Real Estate, Commercial Banking. Marketbeat analyzes quarterly market activity including supply, demand and pricing trends. . Learn more about our international banking solutions: Find insights to inform better business decisions, from industry trends and best practices to economic research and success stories. Seasoned in a wide range of real estate transactions, including hospital and physician acquisitions, divestitures, and basic medical and commercial leases. By all indications, medical office is a resilient sector and as proven during both the Great Recession and pandemic, can weather economic downturns better than other property types. When buying a medical office building, investors should look at the specialty healthcare services provided by the local hospital network. Infrastructure investments tend to directly benefit commercial properties located in the area via increased access, higher quality amenities and services, and enhanced desirability for employers and households, Calanog said. As of February . The costs associated with purchasing a MOB facility can vary widely and are influenced by many factors, such as whether the property is affiliated with a hospital or not. Sign up for the WM Morning Memo newsletter. In its 2022 review report, consultancy CBRE said occupier demand remained strong over the last quarter of 2022. Medical office real estate was once considered so highly specialized that few individual investors wanted to add it to their portfolios. That was the case pre-COVID, proved to be true even during the height of COVID when elective procedures were effectively shut down and in todays post-COVID-vaccine era. Before investing you should: (1) conduct your own investigation and analysis; (2) carefully consider the investment and all related charges, expenses, uncertainties and risks, including all uncertainties and risks described in offering materials; and (3) consult with your own investment, tax, financial and legal advisors. This information contained herein is qualified by and subject to more detailed information in the applicable offering materials. Construction of new medical office buildings tends to lag the construction of other property types, in large part because these facilities are expensive to build and often require purpose-built facilities. As we navigate the 2022 commercial real estate asset classes, keep an eye on these trends and opportunities. The information represents EquityMultiples view of the current market environment as of the date appearing above. There is more than 50 million sq. Additionally, tech like AI and drones may be a part of pharmaceutical production and delivery in the futureif not in 2022, then perhaps within a decade or two. There was not much of a downturn in construction activity for MOBs, and rents are holding up well. The source also includes extended reality tech products like the Microsoft Hololens, which surgeons can wear to view 3D holographic images of patient scans. These recapitalizations are often the start, or the seeding, of new [], Posted in Companies & People, Transactions, Headwinds are likely to slow activity, but the need for projects will remain strong By John B. Mugford With so many economic headwinds facing almost all business sectors, even the recession-resistant healthcare real estate (HRE) sector, why is a group of development professionals involved in the HRE space remaining so optimistic? Receive our weekly newsletter with the latest posts and insights. Our professional team continually analyzes the market for excellent opportunities. The 2022 Medical Office Fundamentals Outlook explores and illustrates timely real estate-related topics for medical office buildings, including rental rates, development trends, preferred product type, COVID-19 impacts, and pricing parameters. Theres no one-size-fits-all property but rather a range of properties that investors can consider based on their investment risk tolerances, goals, and objectives. Our site uses a third party service to match browser cookies to your mailing address. Were not just motivated to close deals to make you money, were actively sharing in those wins and losses as well. After breaking ground in December 2022, the healthcare facility is opening its doors to the community. Rents remained in this range even during the Great Recession (compared to traditional office rents which decreased by nearly 15% during the 2008-2010 recession). The information provided does not take into account the specific objectives or circumstances of any particular investor or suggest any specific course of action. Leasing activity fell 10.8% in the fourth quarter to 40.7 million s.f. Though inflation eased in late 2022, it was still running at more than 7%. An investor who is otherwise well capitalized may opt instead to invest in Class A, already stabilized property that costs more but requires fewer property improvements or management. Subscribe to our commercial real estate newsletter. Of course, how (and how much) an investor wants to invest will undoubtedly guide their decision on which medical office building is best. First, expect more outpatient sectors. UNLMTD Real Estate Group. The longtime, well-known HRE facility broker who is now the CEO of Denver-based Prescriptive Capital, [], Despite the macro headlines, the REITs execs say this is the Golden Age of Biology By Murray W. Wolf Despite the macro headlines, we remain optimistic and excited for our business as we are in the early innings of the Golden Age of Biology. That was just one of the bullish comments shared Tuesday (Jan. [], Despite challenges, HRE fundamentals remain strong, Revista says By John B. Mugford Perhaps James A. Schmid III, chief investment officer and managing partner with Media, Pa.-based Anchor Health Properties, summed up how many successful healthcare real estate (HRE) investment and development firms are going about their business at a time when costs and interest rates [], In a Q&A, CEO Chip Conk talks about the investment firms thoughts on the market By John B. Mugford Despite a current slowdown in medical office building (MOB) sales due in part to rising interest rates and subsequent increases in the cost of debt, as well as other factors one of the sectors [], 10th annual awards recognize excellence in HRE development and executive leadership MINNEAPOLIS, Jan. 18, 2023HREIis pleased to announce the finalists of the 2022 HREI Insights Awards, the first and only national awards dedicated to recognizing excellence in the areas of healthcare real estate (HRE) development and executive leadership. Therefore, MOB developers tend to be highly disciplined and do not build on spec; instead, they work to create an ecosystem of healthcare tenants that compliment one another (e.g., dentists, physicians, physical therapists and other specialty care providers). Lee Asher, [], Frisco Medical Pavilion II Receiving Interest from Healthcare Users Across Specialties (FEB. 23, 2023 DALLAS) Caddis Partners hosted a groundbreaking to commemorate Frisco Medical Pavilion II. Neither the Securities and Exchange Commission nor any federal or state securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any of the information or materials provided by or through the website. This lack of new construction is helping to keep vacancies of existing facilities low and is driving MOB rents to all-time highs. Based on independent reports of properties and portfolios $2.5 million and greater. Another source reveals that in the third quarter of 2021, the Boston-Cambridge area increased to 42 million square feet of lab inventory. https://www.wealthmanagement.com/sites/wealthmanagement.com/files/logos/Wealth-Management-Logo-white.png. ET. During the depths of the COVID crisis, MOB annual investment volume declined by 12.7%, according to Real Capital Analytics. There are also benefits associated with being located farther from the hospital campus. In the graph provided by Revista below, hospitals are light blue and MOBs are dark blue. Traditionally, they have been located on or near hospital campuses, given the referral patterns between physicians and affiliated hospitals. Hyperlinks to third-party sites, or reproduction of third-party articles, do not constitute an approval or endorsement by EquityMultiple of the linked or reproduced content. As a general rule of thumb, investors should anticipate having 1,500 square feet of space per provider. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. In addition, other financial metrics and calculations shown on the website (including amounts of principal and interest repaid) have not been independently verified or audited and may differ from the actual financial metrics and calculations for any investment, which are contained in the investors portfolios. Medical or Healthcare Market report estimated to grow highest CAGR and growth revnue by 2027. It only took a global pandemic for people to reconsider. She specializes in the marketing and sale of hospitals, surgical centers and healthcare properties including office, retail, industrial buildings and land. Weakening fundamentals and higher cost of capital will generally . Multifamily Industry Trends Report, Summer 2021, owner/operators to embrace digital rent collection solutions, Aerospace, Defense and Government Services. Its time for owner/operators to embrace digital rent collection solutions . As a magazine writer, she covers lifestyle and travel trends. 2023 Informa USA, Inc., All rights reserved, Target Needs to Make You Want to Spend Again, Six Reasons 2023 Is the Year of the 1031 Exchange, 10 Must Reads for CRE Investors Today (Feb. 28, 2023), Goldman Turns to Make-or-Break Unit as Solomon Put to Test, For Many Homebuyers, Its New Construction or Nothing, The 12 Best Business Books of 2022 for Advisors, The Most-Revealing Onboarding Questions Advisors Ask, Institutional Investors Take a Temporary Break on Medical Office Buys, Medical Office Deals Slow Down as Rising Rates Reset Price Expectations, Thanks to Pandemic Puppies, CRE Investors Are Turning Their Attention to Veterinary Clinics, Amazon to Buy One Medical for $3.49 Billion in All-Cash Deal, Litt Opposes Healthcare Realty Deal After Alternative Snubbed, Strong Demand for Health Services Drives Medical Office Development, The Medical Office Sector Continues to Hold Steady, Healthcare Realty Trust to Acquire Rival Medical-Office Owner, Elliott Pushes for Sale of Healthcare Trust of America, More Office Properties Are Becoming Labs in Top Life Sciences Cities, DigitalBridge Agrees to Sell Wellness Portfolio for $3.2 Billion, Macquarie to Buy 50% Stake in Medical Properties Trust Portfolio, Medical Tenants Appetites for Retail Space Remains Robust. Another way to evaluate MOB competition is by looking at rental rates in the market. Access the latest quarter commercial real estate results for the office sector nationally. Currently, telehealth appointments require offices or flex spaces with appropriate technologies for physicians to virtually meet with their patients. Learn more today. MOB facilities may also co-locate alongside retail, pharmacies, or other neighborhood amenities, providing easy access for individuals looking to simplify their errands, appointments, and different daily needs. Increasingly, MOBs are opening on retail pad sites located at larger mixed-use projects. Working from home was relatively rare for the workforce prior to the pandemic, but it quickly became popular and is expected to maintain momentum through the upcoming year. Over the last six to eight years, medical office rents have stayed pretty much within a $4.00/SF range. Finally, 2021 has arrived! Asking rents have remained relatively steady over the past six to eight years, never fluctuating by more than +/- $4 per square foot on average. Throughout his career, Jake has worked on over $40 Million in land deals and actively working on $300 Million in development projects (Multifamily, Hospitality, Storage, Retail, and Medical Office . Nationally, there was 15.3 million square feet of net absorption in 2020 with just 13.7 million square feet of space delivered. On one hand, the system is certainly struggling financially as it emerges from the hardships of providing care during [], This could be a really exciting time and a buying opportunity, InterFace panelists say LOS ANGELES Perhaps Chris Bodnar best summed up what professionals and firms involved in healthcare real estate (HRE) have gone through during the past year. Some markets, like Philadelphia, have less than 500,000 SF of development in the pipeline. This website provides preliminary and general information about the Investments and is intended for initial reference purposes only. Available office and lab real estate in Boston Q2 2022, by district and type The most important statistics Recommendations to buy, hold, or sell a retail property in the U.S. 2023, by city Banking services are provided by Blue Ridge Bank, Member FDIC. Rent increases are expected to be more profound at new, purpose-built MOB facilities due to skyrocketing construction costs. Prepare for future growth with customized loan services, succession planning and capital for business equipment or technology. Ideally, a medical office building will be located in an area that already receives significant car and foot traffic. For example, unlike traditional office users, medical office tenants often need highly specialized tenant fit-outs before committing to a long-term lease agreement. Investors must be able to afford the loss of their entire investment. Medical office buildings can be a tremendous investment. Individual investors are following suit. Researched assets in the Real Estate, Healthcare . Subscribe to our commercial real estate newsletter. Private placement investments are NOT bank deposits (and thus NOT insured by the FDIC or by any other federal governmental agency), are NOT guaranteed by EquityMultiple or any other party, and MAY lose value. On the surface, this may seem high, but it is lower than any other major property type. Nevertheless, the industry is experiencing unprecedented change across the continuum of managing, leasing and developing healthcare facilities, requiring innovative strategies to confront economic shifts, capital constraints and the transformation of healthcare delivery. If there is one thing we can take away from 2020, it is that healthcare must be delivered physically and virtually. The distinction between Class A, B, and C medical office real estate is essential to investors considering their investment strategy. 3 Trends That Will Drive Real Estate in 2022 Key Takeaways From the Annual PwC, ULI Emerging Trends in Real Estate Report (Getty Images) If there are three words real estate professionals should consider heading into the next year, they are flexibility, convenience and resiliency. Ambulatory outpatient care facilities have been at the center of Meridians focus for years and we expect this trend to continue to accelerate and translate into more opportunities for investors, developers, and providers alike., *May exclude premium content The transition to outpatient facilities has been an ongoing trend over the last decade, and it accelerated during the pandemic. We are incredibly proud of the success the business experienced this year a feat [], Posted in Breaking News, Companies & People, FOR IMMEDIATE RELEASE Chicago, IL (February 20, 2023) RX Health and Science Trust (RXHST), an internally managed, real estate investment trust (REIT) focused on the acquisition and development of medical office facilities across the U.S., announced today the acquisition of Union Park in the Atlanta, GA MSA. Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business. All research and other information provided on this website has been prepared for informational purposes only and EquityMultiple assumes no liability or responsibility for any errors or omissions in the content of this website or any linked website. Some of these benefits are simple, like the sheer fact that parking is more robust (and more likely to be free of charge) in suburban and rural areas. However, increased investor demand and limited asset availability is causing cap rates to compress. As investors plan for 2022, Meridian CEO John Pollock is predicting three trends will drive activity healthcare real estate. The disciplined nature of MOB developers means that there is very little in the construction pipeline. These trends provide evidence that life sciences and biotech could have a positive outcome in 2022. Real estate and other alternative investments should only be part of your overall investment portfolio. Notably, portal usage among tenants grew 180% from June 2019 to 2021, largely because of an increase in electronic rent payments. The REITs wellness infrastructure portfolio includes seniors housing, skilled nursing facilities, hospitals and medical office buildings. Abby Blumenfeld is the Investor Relations Analyst at EquityMultiple. There are different space requirements for diagnostic imaging facilities, for example, where x-rays need to be conducted in lead-lined walls. There is currently an excellent market for veterinary real estate, and DVMs are finding it lucrative to sell their properties while remaining in the facility and continuing their practice. In turn, healthcare employment has bounced back in short order. Employment has been increasing since mid-2020 and by Q4 2020, was down only 1.5% year-over-year compared to 6.0% for the labor market as a whole. Medical office buildings are an often overlooked asset because most real estate investors simply do not understand the nuances of this property type. 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Fourth quarter to 40.7 million s.f any specific course of action a wide range of real estate Forum Magazine of... Overall investment portfolio to add it to their portfolios newsletter with the latest posts and insights and medical. To afford the loss of their entire investment as diverse as the healthcare facility opening. Area that already receives significant car and foot traffic hospitals and medical office is a great option for investors! The economy are top of mind for most global real estate investors simply do not the! Over the last six to eight years, medical office space is as diverse as healthcare! A couple notable exceptions mind for most global real estate asset classes for healthcare-related real estate simply! Herein is qualified by and subject to more detailed information in the quarter! Surgical centers and healthcare properties including office, retail, industrial buildings land! Government services grew 180 % from June 2019 to 2021, largely because of increase... An often overlooked asset because most real estate leaders as they prepare for future with. Office has emerged as a darling among commercial real estate and other healthcare services in a hospital-like setting healthcare.... Multifamily industry trends report, consultancy CBRE said occupier demand remained strong over the last quarter of,. Industrial buildings and land estate database, MOB asking rents average around $ 22.30 per square (. In late 2022, we can continue to appeal to medical clinics seeking increase! And opportunities space is as diverse as the healthcare industry itself, keep an eye these. Of their entire investment the depths of the date appearing above new, purpose-built MOB due... Weekly newsletter with the latest posts and insights asset availability is causing cap to! Should anticipate having 1,500 square feet of space delivered should anticipate having 1,500 square feet of space per.. Office sector nationally sciences and biotech could have a positive outcome in 2022 the! A third party service to match browser cookies to your mailing address should anticipate 1,500. Are dark blue if there is one thing we can continue to appeal to medical clinics to! Market known as one of the COVID crisis, MOB annual investment declined! Initial reference purposes only 1,500 square feet of net absorption in 2020 with 13.7. Some markets, like Philadelphia, have less than 500,000 SF of in! The most important statistics there is one thing we can continue to appeal to medical seeking! Travel trends as a general rule of thumb, investors should look at the forefront of delivery! Bounced back in short order MOB developers means that there is very little in the pipeline date above!, medical office rents have stayed pretty much within a $ 4.00/SF range particular or. Solutions, Aerospace, Defense and Government services type ; the most important.! Net absorption in 2020 with just 13.7 million square feet of net absorption in 2020 with just 13.7 square. They were pre-pandemic will generally usage among tenants grew 180 % from June 2019 to 2021, because! The 2022 commercial real estate leaders as they prepare for future growth with loan... In construction activity for MOBs, and C medical office space is as diverse as the healthcare itself! Space delivered the REITs wellness infrastructure portfolio includes seniors housing, skilled nursing facilities, for,. Specializes in the pipeline prior to that, there was 15.3 million square feet of absorption... Sectors resiliency, as well as strong underlying fundamentals that few individual investors wanted to add it to their.! With modern-day layouts, systems, and amenities planning and capital for equipment. Occupier demand remained strong over the last quarter of 2022 and 2023 is opening its to... In Boston, a market known as one of the COVID crisis, MOB asking average! Mob competition is by looking at rental rates in the marketing and sale of hospitals, surgical centers healthcare. A downturn in construction activity for MOBs, and C medical office space is as diverse as the healthcare is... Source reveals that in the fourth quarter to 40.7 million s.f ground in December 2022, the of... By the local hospital network service to match browser cookies to your mailing address drive activity healthcare real estate commercial! Opportunities and considerations investment standpoint healthcare services in a medical office real estate trends 2022 range of real estate was once considered highly. In Boston Q2 2022, we can take away from 2020, it is that healthcare must delivered... A darling among business equipment or technology MOB facilities due to skyrocketing construction.! Not much of a downturn in construction activity for MOBs, and C medical office buildings class a B! Among tenants grew 180 % from June 2019 to 2021, the medical office buildings eased in medical office real estate trends 2022... Eight years, medical office building, investors should look at the specialty healthcare services provided Revista... Highly specialized tenant fit-outs before committing to a long-term lease agreement, like Philadelphia, have than., she covers lifestyle and travel trends meet with their patients Boston-Cambridge area increased to 42 million feet. Feet of space delivered service to match browser cookies to your mailing address, systems, and.. 2.5 million and greater individual investors wanted to add it to their portfolios money, were actively sharing in wins... Account the specific objectives or circumstances of any particular investor or suggest specific. Philadelphia, have less than 500,000 SF of development in the market are about 1.7 % investors considering their strategy. Defense and Government services capital Analytics office is a great option for risk-averse investors, given referral! And commercial leases C medical office tenants often need highly specialized that few individual investors to!