Hospital Expansions Surge, MOB Transaction Volume Doubles
As the population grays, with older Americans projected to outnumber children in 2035, according to the Census Bureau, hospital systems are looking to build and investors are looking to get a piece of the action by buying medical office buildings — a sector that saw acquisition volume more than double year-over-year.
Hospital construction is up, with 45.1M SF of new construction in progress, up from a pipeline of 37.4M SF in Q2 2021 and 28.7M SF in Q2 2020, according to healthcare real estate specialist RevistaMed.
Hospitals are expanding at a brisk rate as well. Expansions totaling 50.4M SF are underway, up from 44M SF during the second quarter of 2021, though down from Q2 2020, when total expansions underway reached 53.9M SF.
Of the 163 new hospital projects underway, 30 projects are microhospitals of fewer than 25 beds, which are part of the trend toward community-oriented healthcare, RevistaMed reports. Most hospital developments are still standard in size, however, with an average of 134 beds.
Among the largest projects, the University of California, San Francisco received permission to build a $4.3B hospital at UCSF Helen Diller Medical Center, and Sacramento-based University of California, Davis Medical Center began work on a new $3.8B facility, according to Becker Hospital Review.
Work is also underway on $500M-plus hospital projects in New York, New Jersey, Massachusetts and Texas, Becker reports.
Amid an emphasis on health and well-being, investors are also eager for medical office buildings. RevistaMed reports that there were $4.3B in MOB acquisitions by investors in Q1 2022, up from $2.1B during the same quarter last year.
In 2021, the medical office sector saw $15.4B in transactions, according to Newmark, a record amount, up from the prior record of $14.9B in 2017. Last year’s total was also up from $13.5B in 2020.
The sector has benefited from stickier tenancy and an aging population, healthcare real estate experts say. A record amount of capital for alternative commercial real estate sectors has also led more investors toward MOBs.
“There’s been a steady increase in the amount of institutional capital that has been allocated to medical offices,” Newmark Senior Managing Director Michael Greeley said during Bisnow’s Boston Healthcare Summit earlier this month.