MINNETONKA, MN-For professionals involved in selling, or investing in, medical office buildings, learning where capitalization rates are how – and where they're heading -- is important. Knowing such information can help buyers and sellers prepare for transactions involving income-producing buildings, as the cap rate is typically used to set the return on an investment by using a property's net operating income, value, and, in some instances, other factors. As most people in the business know, the lower the cap rate the higher the demand for such properties, meaning returns will also be lower.

When it comes to MOBs, however, investors are often willing to accept lower cap rates in return for a steady income stream.

As noted, nailing down where cap rates are at any given time, or where they'll be heading in the future, is important information for both investors and sellers. For all of 2012, real estate research firm Real Capital Analytics (RCA) found that the average cap rate for MOBs, which includes on- and off-campus as well as MOBs of varying quality levels, was 7.9 percent.

But as most professionals know, a variety of factors help determine a cap rate, including the quality of the facility, its occupancy rate, and the credit-quality of its tenants.

To help such professionals know where cap rates will be in the future, the US Healthcare Capital Markets Group of CBRE Group Inc. asked respondents to a recent survey to give their predictions on where they believe rates will be in 2013. Nearly 70 companies involved in the sector responded to CBRE's 2013 Healthcare Real Estate Investor/Developer Survey.

Of those, 74% said they believe the average cap rate for class A, on-campus MOBs in 2013 would be below 7%. A little more than a year ago, 50% felt the MOB cap rate would sing below 7%. Meanwhile, 32% of those surveyed in 2013 said the cap rate would be below 6.5%, compared to just 11% saying the same thing in 2012.

“The class A on-campus medical office product continues to price at the most aggressive levels and has arguably surpassed the previous peak in the market that was set in 2007,” CBRE writes in its report. It attributes the compressing cap rates and rising pricing to “more healthcare REITs and institutional investors allocating 'core' funds to the healthcare sector than in previous years.”

While on-campus MOBs have long been favored by investors, off-campus facilities, especially class A facilities with hospitals as tenants, have steadily gained favor. CBRE's survey backs this up, as 69% of the respondents said they believe the average cap rate for Class A off-campus MOBs will be below 7.5% in 2013 – a 68% increase from the previous year.

The MOB type that will most likely experience the most cap rate compression in 2013, according to CBRE's respondents, will be on-campus class B buildings. According to the survey, 54% believe cap rates for this facility type will be below 7.5% in 2013 – a 225% increase over 2012.

John B. Mugford is the Editor of Healthcare Real Estate Insights™, the nation's first and only publication totally dedicated to covering news and trends in healthcare real estate development, financing and investment. For more information, please visit www.HREInsights.com.