Rents Proceed to Rise as Emptiness Falls
In 2023, hire progress in 4 of the highest 10 main U.S. MOB markets was above the nationwide common of two.25%. Miami led the pack with the best progress, at 2.9%, intently adopted by Atlanta, at 2.8%, and each Dallas and New York, 2.6%.
Los Angeles maintained its place within the prime 10 markets with the best common web MOB asking rents, at $35.26 per sq. foot; all different main markets’ recorded rents had been under $30 per sq. foot. These had been New York ($29.23 per sq. foot), Washington, D.C. ($27.17 per sq. foot), Boston ($27.08 per sq. foot), and Miami ($27.02 per sq. foot).
Among the many prime 10 markets, 5 ended 2023 with emptiness charges nicely above the nationwide common of seven.2% for the High 100 markets. Houston stood out as the one main market with a double-digit emptiness price, at 11.7%, although that was 60 foundation factors decrease than in 2022. Dallas and Washington, D.C., adopted intently, with 9.1% and eight.9% emptiness charges, respectively. Conversely, New York boasted the bottom emptiness ranges among the many main markets, at 6.0%, with Boston and Miami not far behind at 6.1%.
Larger Price of Capital Results in Falling MOB Building
At the same time as delivered MOB area in 2023 was on par with that in 2022, development begins fell 44.8% as a consequence of elevated borrowing and development prices. Completions of 10.8 million sq. toes throughout 2023 had been up marginally from 10.3 million sq. toes in 2022. However new challenge begins declined from 16.2 million sq. toes to eight.9 million sq. toes. As of the top of 2023, 31.9 million sq. toes had been below development.
Among the many almost 600 healthcare actual property initiatives underway throughout the High 100 markets, 213 are centered on hospital developments. Of one other 376 medical amenities below development, 73% are off-campus, reflecting the shift towards outpatient clinics over in-patient hospital care.
Seven metropolitan areas had multiple million sq. toes of MOB development in progressat the shut of 2023, half the variety of the earlier 12 months. Houston led with 2.0 million sq. toes, adopted by New York with 1.9 million sq. toes, and Los Angeles and Washington, D.C., every with 1.6 million sq. toes.
Cap Charges Rise as Pricing Falls
After a record-setting 12 months in 2022, MOB funding dropped considerably in 2023 because the Fed’s aggressive price hike marketing campaign seized capital markets. Whole gross sales quantity dropped from $19.1 billion in 2022 to $7.36 billion in 2023. Regardless of these circumstances, persevering with curiosity within the sector means gross sales may regain momentum, with rate of interest cuts anticipated later this 12 months.
Common MOB cap charges rose by 80 foundation factors in the course of the 12 months, to six.7%, whereas common pricing fell from $329 per sq. foot to $292 on the finish of 2023. Eleven metros had greater than $500 million in MOB property gross sales in 2023, led by New York ($1.59 billion), Phoenix ($1.48 billion), Los Angeles ($1.45 billion), and Boston ($1.29 billion).
