Investment demand and corresponding sale transaction volume for healthcare real estate have reached historic highs, according to the Healthcare & Life Sciences Insider, an industry report released by Brown Gibbon Lang & Company (BGL).
The recession-resilient asset class continues to attract broad investor appeal, as capital inflows continue to drive investor demand and provide stability for healthcare real estate values, including medical office buildings (MOBs), ambulatory surgery centers (ASCs), short-stay hospitals, as well as other types of clinical real estate assets.
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The BGL report, now available online, highlights robust investment demand for high quality healthcare real estate assets.
For the fourth consecutive year, healthcare real estate sales are at peak levels, already surpassing $11.9 billion in total transaction volume for the first half of 2015 — up from $9.8 billion in 2014 and $7.1 billion in 2013.
The extended low interest rate environment, unprecedented amount of institutional capital being raised, and predictable demand drivers for healthcare services are contributing to rising valuation multiples.
“The proven resiliency, reliable returns, and sound market fundamentals have led to substantial interest from all investor profiles, including public and private REITs, pension funds, life insurance companies, foreign funds, institutional investors, private syndication, and high net-worth private investors,” said Chris Stai, BGL managing director and head of the firm’s Healthcare Real Estate practice.
“As a result, the inflow of capital in search of stable, risk-adjusted investment opportunities within the space is expected to grow, providing stability for healthcare real estate values.”
Continued consolidation involving health systems and physician groups combined with optimal capital market conditions are fueling investor demand for healthcare real estate and driving real estate valuations to unprecedented levels.
Commenting on current market conditions, John Riddle, co-head of BGL’s Healthcare & Life Sciences investment banking practice, said, “Many of our provider clients are conducting strategic reviews and looking closely at monetizing both core and non-core assets, transferring ownership and valuation risk, and redeploying capital towards growth opportunities and other core areas of their business, while maintaining a degree of control over the asset.”
