5 Reasons To Invest In Medical Office Buildings

There is a growing interest in investing in medical office buildings (MOB) – and for good reason. While the overall office real estate asset class has suffered significantly over the last several years due to a move to work from home, medical office real estate has been overlooked and appears undervalued. 

MOBs are now attracting more attention from experienced real estate asset managers. Given the current economy and real estate market conditions, investing in medical office buildings is highly attractive as it is a stable investment with solid upside potential and offers an opportunity to diversify an investment portfolio.

Here are five attractive attributes of investing in medical office buildings.

1. Medical Sector has Economic Resilience 

The healthcare industry as a whole has shown remarkable resilience through economic cycles, including the recent pandemic. The need for health care and treatment of patients is not subject to downturns due to economic and market conditions. In fact, just the opposite. The healthcare industry has seen significant growth in demand for outpatient healthcare services. 

2. Medical Office Buildings have High Occupancy Rate and Long Leases

Over the last decade, the trend in the management of healthcare has been to treat patients through medical offices rather than through traditional hospitals. Healthcare provider tenants have moved many services to medical office buildings. The result is that medical office buildings have high occupancy rates with long-term leases.

3. High Retention Rates – Predictable Revenue Streams

Given that MOB tenants usually remain in the same location for extended periods, they accept lease terms with renewal clauses with steady rent increases. Physicians typically choose long lease terms so they can remain in one location in close proximity to their patients and hospital services. In addition, medical offices usually have unique buildouts resulting in a high cost of relocating and high retention rates.

4. Diverse, Strong Tenant Base 

Another benefit to investing in medical office buildings is the diverse tenant base, including women’s health, dermatologists, oncologists, kidney dialysis centers, surgical centers and imaging services. These tenants have strong and steady incomes.

5. Growth in Demand 

Medical office buildings are experiencing the same sort of valuation drivers as multifamily real estate – steadily increasing values due to strong demand, rising rents and high occupancy. The gray tsunami from 75 million Baby Boomers is upon us and over 4 million Americans will turn 65 years old this year. Baby Boomers will require an exponentially increasing amount of medical care.

Increased demand for medical care and medical office buildings will continue as people seek more efficient, convenient and accessible medical care. For real estate investors seeking a recession-resistant investment, medical office buildings are a sound investment.

For more information about investing in medical office building real estate, visit CityVest.