MOB Tenants Pay a Premium for These Markets

Across the nation, demand for medical office buildings is persistent. As the population ages and the youngest of the Baby Boomers enter their 60s, the need for in-person health care is increasingly critical. But some markets in the U.S. are experiencing more demand than others, and as a result, some MOB spaces are commanding top dollar. In these areas, MOB brokerage business is unlikely to waver.

“I think there are a lot of markets across the U.S. with very attractive MOB opportunities but, like all real estate investments, the ‘hotness’ of the market is in the eye of the beholder,” Nathan Riley, principal, asset management at BGO, told Commercial Property Executive. “That said, I think an important determination to whether a market has the potential to be attractive is to look at the demographic trends through the lens of a medical professional.”

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And through the lens of someone in the medical field, access to patients and an increasing patient base is the key. This makes markets like those across the Sunbelt states particularly attractive as well as cities where people like to age in place—like Miami.

Southern states at large are presenting opportunity as well. “Many MOBs are looking to open locations in southern states so that they can serve snowbird patients both in their northern home bases and when they’re at their snowbird vacation homes down south,” said Eric Hoffman, vice president and national health-care sector lead at Project Management Advisors.

Medical tenants need people

Places with access to a tremendous pool of people, like Manhattan, have a large concentration of MOBs, too. With ready access via trains, cars and subways, certain parts of the city have a dearth of medical space available to a list of waiting potential tenants, said Jason Muss, president of Muss Development.

“Then there are specialized areas like Boston, Miami and Los Angeles that present tremendous medical benefits,” Muss continued.

Locating in a big urban core as a top doctor provides an access advantage as well as a centrality benefit, pushing rental rates up. Many medical uses—surgery centers, hospitals, cancer treatment facilities, etc.—seek out urban centers before the suburbs. For these types of tenants, brokers must study the surrounding population first to then understand the real estate need.