January saw the arrival of COVID-19 in the United States as well as the origination of fear and widespread uncertainty throughout the country. In the months thereafter, a question was prompted for investors, nationwide—do ‘virus-proof’ investments exist?
There appears to be one sector of the commercial real estate industry that may prove to be virtually unaffected, especially in suburban areas. Despite the times, medical office buildings seem to be providing investors with the stability and low level of risk that they seek in portfolio expansion.
Prior to January, major urban centers and cities were already losing their appeal for many Americans. High rental rates and changes in the labor market have slowly pushed the nation’s youngest adults towards suburban living. When you factor that in with our country’s aging population, expanded medical insurance coverage, evolved treatment options and emphasis on preventative healthcare, the result is a stable and steady demand for quality medical real estate. This fuels post-COVID projections showing a quick bounce back for the suburban medical investment market.
Low interest rates reduce the cost of property acquisition and holding, leveraging equity for maximum return. The medical sector provides investors with stable, long-term income often times based on leases signed by quality, large-scale national or regional tenants. Current capitalization (CAP) rates on medical investment properties range from 6.5%-8%; at the lowest end of this range, 6.5x the 10-year treasury rate is represented. The value of these lease payments will only increase with reduced rates as investors look for yield. Not only will the property provide a gain in value, but low interest rates will also produce secure, seasoned cash flow.
Doug James, Senior Advisor and leader of NAI Coastal’s branch office in Easton, Maryland, has over three decades of commercial real estate experience and an in-depth understanding of all aspects of medical acquisitions. Doug is highly qualified to advise clients as they explore their investment options, formulate strategy and seek out profit maximization.
To discuss the opportunities presented by today’s real estate market, contact Doug James or Bridgit Frost at firstname.lastname@example.org / email@example.com or by calling 410-202-2648.
About the Author
Doug James is a Senior Advisor with NAI Coastal. He has consistently been named as one of the Regional Top Commercial Advisors throughout Delmarva. He is known for his long-standing business relationships and ability to navigate local government based on profound regional knowledge. Throughout the course of his career, James has developed a thorough understanding of the healthcare industry’s regulatory and compliance standards and is an expert in medical office building development.