GLOBAL HEALTHCARE SERVICES

NEWMARK

March Insights: Healthcare Perspective on Rising Bond Yields

Commentary by: Todd Perman, CCIM, Vice Chairman, Global Healthcare Services

In a report published earlier this month, Newmark’s Jimmy Hinton, Head of Investor Strategies, analyzed the recent rise in bond yields, which has been steadily increasing since November 2020. With February 2021 seeing the 10-year U.S. Treasury rise faster than any 30-day period in the past four years, it is evident that the steepened yield curve has several coming implications for commercial real estate and specifically the healthcare real estate sector.

How does this impact healthcare real estate?

Todd Perman, Vice Chairman for Global Healthcare Services advises providers and health systems, “Due to the onset of the pandemic, healthcare and other alternative assets have benefited from a flight-to-quality shift, with capital chasing these assets for a conservative investment. Medical office has been one of the leaders of this space, although the rising interest rates could affect values in the long run. Our team fully expects the medical office sector to be more stable than other asset classes and will resist the impact of this rise in capital costs. Furthermore, the demand for quality assets is very high with many new investors entering the space; the competition to acquire is fierce, which is keeping cap rates extremely compressed.”

The healthcare landscape proved to be stable once again during a challenging 2020; medical office building sales volume topped $11B in 2020 for the fifth straight year in a row*. Amid rising bond yields, we anticipate investor confidence in the sector to continue, with healthcare providers evaluating capital options from multiple sources—public REITs, which are seeing heightened activity after a slight decline mid-2020, increased interest from international firms, and continued private equity activity.


Read the featured “Perspective on Rising Bond Yield” report here.


*Source: Revista

All information contained in this publication is derived from sources that are deemed to be reliable. However, Newmark has not verified any such information, and the same constitutes the statements and representations only of the source thereof, and not of Newmark. Any recipient of this publication should independently verify such information and all other information that may be material to any decision that recipient may make in response to this publication, and should consult with professionals of the recipient's choice with regard to all aspects of that decision, including its legal, financial, and tax aspects and implications. Any recipient of this publication may not, without the prior written approval of Newmark, distribute, disseminate, publish, transmit, copy, broadcast, upload, download, or in any other way reproduce this publication or any of the information it contains. This document is intended for informational purposes only and none of the content is intended to advise or otherwise recommend a specific strategy. It is not to be relied upon in any way to predict market movement, investment in securities, transactions, investment strategies or any other matter.

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