MOB TRANSACTION VOLUME IS EXPECTED TO RISE IN 2023

It’s no secret that commercial real estate transactions have slowed recently. Inflation, higher interest rates, and other macro factors are slowing down the market.

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JLL recently released the results of an investor survey (here)... that has a lot of interesting insights across real estate sectors around 2022 performance and their expectations for 2023.

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The Medical Office Building (MOB) sector has noticeably bucked the trend of lower commercial real estate investments… by having considerably less of a slowdown. And expectation is that volume will pick up across later in 2023.

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One factor that looks particularly good for MOB is that many of them are not yet owned by professional investors. These properties are often owned by hospital groups or private practices. That creates an opening for Alliance.

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Medical groups do not need to own their buildings to deliver care. Ownership ties up a lot of capital that could be better used elsewhere.

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Furthermore, many medical practices are currently owned by baby boomers who are at or near retirement age. Selling medical real estate offers them a great way to cash out for retirement, or to buy out retiring partners, without any harm to the business.

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Alliance loves sale-leaseback deals where we buy a property and immediately lease it back to the former owners. The terms are all negotiated in advance, so the seller/tenants get everything they need to remain happy in the property for the long term. Alliance gets great properties with committed tenants. It’s win-win.

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For larger hospital groups, selling off real estate is a great way to raise capital to cover expenses in hard times, or to invest in other capital improvements that are more directly relevant to their work.

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The resilient medical industry is maintaining strong demand for office space. And more and more, they’re divesting real estate holdings that they do not need to deliver care to patients.

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Occupancy is high, and telehealth as a portion of medical appointments is stable or even shrinking.

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The fundamentals for MOBs remain strong, and Alliance is well positioned to find and execute great deals.

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