National asking cap rates in the single-tenant medical sector compressed to 5.95% in the third quarter, according to The Boulder Group’s 2021 Net Lease Medical Report. This represented a 55-basis-point decrease from a year ago.
“An increased investor allocation for medical properties was a primary factor in cap rate compression,” said Randy Blankstein, president, The Boulder Group. “Additionally, strong investor demand put downward pressure on cap rates in the sector.”
Since 2017, net lease medical has been priced at a discount compared to the overall net lease sector. However, Q3 saw net lease medical properties priced at a four-bp premium to the overall net lease sector following a year of significant compression.
Lower price point, net lease medical assets provided an opportunity to investors when compared to net lease retail. In Q3, net lease medical was priced at a 15-bp discount to net lease retail.
“Medical-related tenants continue to expand off hospital campuses and into historically retail real estate locations, implementing so-called ‘medtail’ strategies,” said Jimmy Goodman, partner, The Boulder Group. “Net lease investors that previously focused on retail real estate added this asset class to their acquisition criteria in search of higher yields.”
Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 16-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 7-10 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces.
Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and GlobeSt.com at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications.
Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).