Investors Love Medical Office In Chicago More Than Anywhere Except NY
Investors ponied up $337M during the first half of 2018 for medical office buildings in metro Chicago. That total made Chicago the second-most-active market in that sector, trailing only greater New York, which saw $549M in deals, according to Avison Young.
Nationwide, 160 MOBs totaling 6.48M SF traded hands from January to June 2018, the Mid-Year Medical Office Update from Avison Young’s Chicago office reports. Some of the largest deals were in the Chicago-area market.
For instance, Harrison Street Real Estate Capital acquired the DuPage Medical Group Portfolio, a 439K SF, eight-building portfolio for $240M in June. The buildings are in Naperville, Lisle and other west and southwest Chicago suburbs.
In April, Community Healthcare Trust bought the JOHA Cancer Center Portfolio — a four-building, 170K SF portfolio in Chicago’s suburbs — for $33M.
Demand for MOBs remains strong and construction has been tempered recently, according to the report. At the midpoint of 2018, supply of high-quality assets is limited in many markets, due in part to the significant buying activity during the past several years.
Yet buyers are motivated. REITs in particular have been making a bigger push into the medical office sector, according to Avison Young. During the past 24 months, three of the top four buyers — accounting for 226 property acquisitions totaling $5.64B — were REITs.
Private equity firms, such as Harrison Street Real Estate Capital — a company that purchased 52 assets for a total of $1B in the past 24 months — have also moved into the space in recent years, the report notes.
Sellers are motivated, which is contributing to the rush of transactions.
“We are seeing more and more physician groups, both large and small, looking to monetize their assets to manage long-term strategy and capitalize on market environment for leased assets,” Chicago-based Avison Young principal Mike Wilson said in a statement. “Investors are focused on this sector as it provides a stable, lasting investment opportunity.”
All together, investors spent $1.87B nationwide during the first half of 2018 on MOBs. Besides New York and Chicago, the top markets were Houston, with $276M in sales, Atlanta, with $177M, and — something of a surprise, considering its size — Milwaukee, with $156M.
