What Factors Bring the Highest Prices for Medical Office Buildings?

shutterstock_219639532If this is the year to sell your medical office building (MOB), you may have chosen the best time to sell in the next decade. Market conditions are excellent for these properties considering (1) low interest rates, (2) low cap rates, (3) low availability of healthcare properties for sale, and (4) the high number of investors wanting to buy them. Demographic drivers continue to strengthen consumer demand for medical services. Medical office buildings are considered more stable because of creditable tenants who sign longer term leases and invest significant capital in their spaces. Interest could not be higher from healthcare-property investors and lenders.

The most obvious reasons to sell are good timing for a higher return on the investment and the desire to use the money for another investment. However, some additional popular reasons include changes in partnerships and desired percentages of ownership, a desire to put cash back into the operation of the business, hiring personnel, updating equipment, and renovating areas.

Once you know it's time to sell, how do you know what is realistic in price expectations? A property is in the best position to sell when it has:

1. a good location with a good story (growth area, visibility, high traffic),
2. a high occupancy with strong credit healthcare tenants,
3. a significant number of years left on the tenant leases (more than five is preferable),
and
4. recent (in the last few years) construction or renovation of the property.

Sellers are seeing aggressive offer prices for quality medical properties. Your best time to sell is always when the building is newer, has little vacancy and strong leases with good tenants.

About the author: Beth Young is Senior Vice President of Colliers International-Houston where she specializes in the sale and leasing of healthcare properties. She can be reached at 713-380-2166 or Beth.Young@Colliers.com