Experts in the healthcare real estate industry predict that cap rates will remain stable in 2024, with fluctuations of no more than 10 basis points. This forecast comes from Partner Valuation Advisors’ Healthcare Investor Survey, which also reveals that investors are only slightly increasing their expectations for going-in and exit cap rates.
According to survey respondents, property values have decreased due to rising capital costs and higher cap rates. The majority believe that healthcare property values have declined by 10% to 20% over the past year.
Erik Hill, MAI, CCIM, MRICS – national practice leader for healthcare and life science at Partner Valuation Advisors – notes that despite these challenges, the fundamentals of the sector remain strong. He expects more investors to focus on traditional properties like medical office buildings (MOBs) and hospitals as well as alternative assets such as surgery centers and rehabilitation facilities.
Hill explains: “Over the last decade, these types of properties have maintained high occupancy levels with steady rent growth between 2-3%, providing predictable returns for long-term investors.” He adds that due to their specialized build-out and essential nature within the medical field’s growing demand trends – tenant retention is typically high. With limited supply expected in this sector coupled with favorable demographics – committed investors can expect an attractive investment environment supported by strong operational relationships.”
