Written by: Garth Hogan | Executive Managing Director, Global Healthcare Services, Newmark

2016 has been an unforgettable year in healthcare, interest rates and politics. Even with the uncertainty of an election year and the threat of repealing the Affordable Care Act (ACA), remarkably, healthcare real estate growth and investment demand stayed strong. Transaction volume was lower than 2015 but we saw an increased demand for the medical office building (MOB) asset class as private equity and foreign investment is becoming more familiar with the nuances of healthcare. With the yearend reports yet to be finalized, here are some recent highlights:

• Transaction Volume – Q3’2016 closed with $1.9 billion in MOB transactions located in the US, a -16% decrease compared to Q3’2015
  
  
• Investment Demand – Capitalization rates declined to an average of 6.35% for Q3’2016, a decrease compared to the prior quarter (RCA)
  
  
• Buyer Profile - Private investors represented 44% of the MOB buyer pool, followed by publicly traded healthcare REITs representing 32% year-to-date as of Q3’2016 (RCA)
  
  
• Vacancy Rate – The vacancy rate fell for the 10th consecutive quarter, ending Q3’2016 at 7.8%, its lowest level in more than eight years (Costar)
  
  
• New Construction – In 2015, 14.6 million square feet of new MOB space was delivered to the market with an additional 22 million square feet being delivered in 2016 (RevistaMed)

The healthcare real estate “pipelines” are already filling up for Q1’2017 and we are all looking forward to the growth and changes that are ahead. Hospitals and providers will continue be challenged with cost reduction strategies, consolidation and the need for capital, but they are adapting to the new landscape and we are starting to see positive outcomes.