In the press

December | 2021

Heads Up Investors: Not All Struggling Offices are Meant to be MOB

SCOTTSDALE, AZ—For Jon Boyajian, a principal at Echo Real Estate Capital, the biggest change in the healthcare real estate space has been the influx of investors, brokers and capital providers getting into the healthcare space. At the GlobeSt. Healthcare Real Estate conference opening session, he said that the trend began before Covid, but has since accelerated.

“And the trend is here to stay,” he said, because of the resiliency of medical office.

But as interest intensifies, some investors are miscalculating what is a quality product—and they are being helped along this path by owners who are marketing questionable properties.  Namely, some office properties with a medical office tenant are rebranding to generate investor interest. In some cases, properties with as little as 25% medical office are being marketed as healthcare. “All you need is one medical office tenant, and it is trying to be pitched as a medical office deal,” Boyajian told in an earlier discussion.  “It may have insurance offices, marketing firms, accountants and a smattering of other office uses, but if you have one healthcare tenant, it is being billed as a value-add medical office deal.”

In tandem with this trend, some developers are repurposing dated office buildings into medical office and in some cases they shouldn’t, according to panelist Angie Weber, a first VP at CBRE. “Not all garbage office buildings are supposed to be repurposed into medical office buildings,” she said. “This time that we are in, in repurposing, we need to really analyze and make sure we are repurposing the right buildings.”

Investors, in short, will have to be patient.

“These health systems are going through it right now and they are not moving quickly, Weber said. “This hasn’t been an easy two years for the systems and it has changed their thought process and the way they are navigating and the way they are thinking about deals.”

Weber notes that when the systems start repurposing, it will create more opportunity but she said “it still doesn’t mean you should look at every crappy office building.”


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