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Healthcare RE Cap Rates Expected to Hold Steady in 2024
Healthcare real estate leaders believe cap rates will remain relatively flat in 2024, fluctuating within a narrow range of plus or minus 10 basis points, according to the inaugural edition of Partner Valuation Advisors’ Healthcare Investor Survey. The survey also found that investors are underwriting only a slight increase between going-in cap rates and exit cap rates.
That being the case, a consensus of survey respondents indicated that property values have declined due to the increased cost of capital and increased cap rates. Most respondents believe the value of healthcare properties declined between 10% and 20% over the past 12 months.
“Overall, the fundamentals of the healthcare real estate sector remain strong as the need for MOBs, Hospitals, and various alternative healthcare properties continues to increase,” said Erik Hill, MAI, CCIM, MRICS, Partner Valuation Advisors’ national practice leader of healthcare and life science. “We anticipate more investors to allocate capital to traditional healthcare real estate (MOBs and hospitals) and to the various alternative healthcare assets (surgery centers, inpatient rehabilitation facilities, behavioral facilities and substance use treatment facilities, among others).
“Over the past decade, these healthcare property types have been able to maintain high occupancy levels, steady 2-3% rent growth, and predictable returns,” he continued. “Due to the needs-based nature of the medical sector and the specialized build-out of most tenant spaces, healthcare properties have a high tenant retention rate. Given the robust demographic trends and limited supply, the healthcare sector will offer an attractive investment environment for committed, long-term investors with strong operational relationships.”
- ◦Sale/Acquisition
