For good reason, there is a growing interest in investing in Medical Office Buildings (MOB).
While the broader office real estate asset class has suffered severely in recent years as a result of the shift to work from home, medical office real estate has been neglected and appears undervalued.
MOBs are gaining popularity among experienced real estate asset managers. Strong underlying fundamentals, an extraordinary growth trend, high occupancy, long-term tenant leases, and durability in all economic circumstances characterize medical office real estate.
Given the current situation of the economy and real estate market, investing in medical office buildings is particularly appealing because it is a stable investment with significant upside potential and provides an opportunity to diversify an investment portfolio.
Benefit Of Investing In Medical Building Office Space As An Investor Of Commercial Real Estate
- Economic Stability
The healthcare industry is expanding. The desire to get health care in convenient outpatient settings to avoid the costs associated with traditional hospital care has steadily increased. Advances in technology and clinical innovation, combined with a shift in patient preferences, have resulted in increased demand for outpatient healthcare services. Medical office space is in high demand due to the combination of convenient locations and much lower expenses than a hospital.
- High Rate of Occupancy
The tendency in health-care management has been to treat patients in doctor offices rather than traditional hospitals. As a result of this growth, medical office buildings now offer a variety of specialized services such as imaging, laboratory, surgery facilities, and urgent care facilities.
Tenants in medical office buildings sign long-term leases, which often last five to ten years. These medical tenants also have excellent financial standing. These long-term leases, along with financially healthy tenants, give MOB investors with a dependable rental income stream with punctual payments that rarely fall behind.
- Increased Demand
Medical office buildings are experiencing the same valuation factors as multifamily real estate, such as strong demand, rising rents, and high occupancy. The fundamental explanation for the high prices is the same: demographic patterns.
- High Retention Rates — Consistent Revenue Flows
Because MOB tenants typically stay in the same area over extended periods of time, they accept lease agreements that include consistent rate increases. Long lease agreements are frequently chosen by physicians in order to remain in one place close to their patients and hospital facilities. Furthermore, medical offices typically have distinctive buildouts, resulting in high relocation costs and high retention rates.
Another advantage of the MOB for a healthcare provider is that it houses related medical services such as surgical rooms, imaging, and labs. The mix of perks provided by the medical office building leads to medical service tenants agreeing to consistent rent hikes. Long leases and strong retention rates are evidence of the sector’s steady and more attractive predictable cash source for investors.
- Wide Range of Tenants
The broad tenant base makes medical office building investments appealing. Tenants in medical office buildings may include primary care physicians, plastic surgeons, women’s health, dermatologists, oncologists, kidney dialysis centers, labs, and imaging services. Copays and out-of-pocket payments, as well as insurance and government reimbursements, provide a consistent source of revenue for these tenants.
As individuals seek more efficient, convenient, and accessible medical care, there will be a rise in demand for medical services and medical office buildings. Medical office buildings are a good investment for real estate investors looking for a recession-proof investment with rising demand and rising rents and values.
As informed investors, we should understand the risks associated with real estate investing and that there is no guarantee. Please do your due diligence.