In commercial real estate investing, there’s one sector that’s quietly outperforming the rest: medical office buildings. Discover 5 compelling reasons why medical office buildings could be the smart move for your portfolio.
#1: Economic Durability in Uncertain Times
Investing in medical office buildings (MOBs) comes with a plethora of benefits, especially in today’s unpredictable economic climate. One of the most compelling aspects of investing in medical office buildings is their economic resilience. Unlike many other sectors, the healthcare industry is not directly tied to market conditions. During the pandemic-induced economic downturn, while most sectors experienced significant challenges, healthcare services surged. This demand continues to grow, with nearly a million new employees added to the healthcare sector, many of whom work in medical office buildings. This stability provides a safeguard against market volatility, making MOBs a solid investment.
#2: High Occupancy and Long Leases
Medical office buildings significantly outperform traditional office spaces in terms of occupancy rates and lease lengths. In major U.S. cities like San Francisco, traditional office buildings have an average occupancy rate of around 61% and lease lengths of three to five years. In contrast, MOBs boast an impressive 92% occupancy rate with lease lengths ranging from seven to ten years. The extended lease periods are often due to costly, specialized tenant improvements and equipment for medical practices, making relocation financially impractical. This results in higher occupancies and more secure, long-term leases for you as an investor.
#3: Reliable Retention and Revenue Streams
Medical office buildings offer financial consistency through high retention rates and predictable revenue streams.
- Long Lease Terms: The long lease terms mean that tenants, often doctors, are more likely to renew, as tenants seldom relocate due to the high costs associated with moving medical offices.
- Proximity to Patients: Proximity to patients and communities further reduces the likelihood of tenant relocation.
This long-term lease renewal process builds a reliable income stream. As a result, investors can anticipate stable revenue growth year over year.
#4: Diverse and High-Demand Tenant Base
MOBs attract a diverse and robust tenant base, spanning specialties such as dermatology, oncology, pediatrics, women’s health, orthopedics, dentistry and more. This diversity ensures a consistent influx of high-quality tenants and a strong income potential. A diverse tenant base also mitigates market risks associated with any single specialty, making your investment more resilient and continuously profitable.
#5: The “Gray Tsunami” Will Drive Growth
The aging baby boomer population, often referred to as the ‘gray tsunami,’ represents a significant growth driver for medical office buildings. As 75 million boomers continue to age, their increasing need for healthcare services will sustain and boost demand for medical office spaces. With aging demographics contributing to rising occupancy and rent rates, investments in this sector are poised for long-term growth, making them recession-resistant.
If you have any questions, post a comment below or text PETER to 833-942-4516.
Every Successful Commercial Real Estate Investor Has a Mentor
Often overshadowed by other investment opportunities, this niche offers long-term stability, consistent cash flow, and less competition than multifamily. With careful planning and our expert guidance, you can take advantage of these unique benefits and position yourself for long-term financial success in a stable and growing sector. Get your mentor here: Commercial Property Advisors Protege Program
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