Medical Office Draws More Investors Post Pandemic

The medical office sector was considered a solid asset class before the pandemic. But during the COVID-19 crisis, it proved to be surprisingly durable and these newfound growth drivers are expected to continue this year.

The overall strong fundamentals before the pandemic and the resiliency during the economic downturn have attracted a broader range of investors to the medical office, according to Marcus and Millichap. In addition, it says that the rise in population aged 65 and older and a rise in elective procedures and routine appointments could increase the number of buyers of sub-$10 million on- and off-campus assets this year.

This year, Marcus & Millichap projects that a 20 point rise in vacancy to 9.7% and an increase in newly built space should push the national asking rate 1.6% to an average of $21.85 per square foot. This gain represents a ninth consecutive year of positive marketed rent growth for the sector.