U.S. Medical Office Building Sector Seen As Prescription for Continued Strong Growth in Commercial Real Estate

Dallas/Fort Worth Leads Nation in Highest MOB Growth

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Apr 02, 2019, 10:05 ET

DALLAS, April 2, 2019 /PRNewswire/ -- Considered one of the best bets in commercial real estate investments, the medical office building (MOB) sector is staying healthy as a result of an industry trend to lower healthcare property operating costs and other factors driving demand for these facilities, according to BBG, a leading national commercial real estate valuation, advisory and assessment firm.

The number of MOBs expanded about 50 percent to approximately 41,000 nationwide from 2005 to 2016, according to a recently released report on this fast-growing commercial real estate sector.

BBG CEO Chris Roach says the strong demand for MOB properties is the result of the heathcare sector "shifting to a more efficient model of providing an improved patient experience while reducing overall operating costs."

The Dallas/Fort Worth area had the highest number of completions in MOB construction in the United States from the third quarter of 2017 to the second quarter in 2018, according to the report. The region had nearly one million square feet of medical office space added during this period.

Houston, Minneapolis/St. Paul, Boston, Atlanta and Chicago also were listed as other cities with the largest concentration of MOB construction projects. Nationally, the MOB market accounted for an estimated 22 million square feet in 2018.

Increasing demand for limited inventories of newly constructed, high-quality medical office space and other outpatient facilities drove rental prices for these facilities to their highest level in the second quarter of 2018. The average asking rental price rose to nearly $23 per square foot, a 1.4 percent increase year-to-year.

Industry experts predict the rate of construction and renovation of medical office properties is expected to show continued growth in the years ahead if changing healthcare trends serve as a reliable indicator.

MOB demand has been attributed to healthcare systems favoring these properties to help lower operating costs; an aging baby-boomer population's need for medical care; the millennial generation's penchant for convenience and technology and the pursuit of a healthier lifestyle; changes in reimbursement and regulations; growing investor interest; among other factors.

BBG CEO Chris Roach commented on the MOB market: "The current strength in the medical office property market is the direct result of the nation's healthcare industry shifting to a more efficient model of providing an improved patient experience while reducing overall operating costs. We anticipate that this trend in healthcare delivery will keep market valuations for these properties at attractive levels in the foreseeable future."

BBG's healthcare group is a leading national provider of valuation and consulting services for healthcare systems, financial institutions, law firms and other entities focused on the healthcare industry. The group's services include fair market rent analysis, valuations, medical office timeshare, Stark Law compliance, tax appeal and litigation support.

About BBG
BBG is a leading independent national commercial real-estate valuation, advisory and assessment firm headquartered in Dallas with 34 offices in key US markets. BBG has achieved a reputation for personal attention, on-time delivery and deep expertise in multi-family, office, retail and industrial sectors. For more information about BBG, please visit www.bbgres.com.

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SOURCE BBG