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Why Investors Are Returning to the Medical Office Niche

National, multifamily and retail investors are beginning to see the once too expensive SoCal medical office market as a prime opportunity.

By Kelsi Maree Borland | kelsimareeborland | Updated on September 07, 2017

High tenant demand in the medical office niche is fueling a resurgence of investment activity. According to a new report from CBRE, medical office rents are up 9% since 2010. Additionally, an increasing senior population, which is expected to double between 2015 and 2055 to 92 million, should fuel demand for the next several decades. As a result, investors are turning to the niche asset class. This includes both national investors and multifamily and retail investors, who are trading into these properties.

“Healthcare real estate in Southern California is very expensive. Traditionally, most national players have chosen to stay out of this market due to more attractive returns on their investments in healthcare real estate elsewhere,” CBRE’s Bryan Lewitt, SVP and practice leader of the Southern California healthcare services group,” tells GlobeSt.com. “Most of the medical-office building owners here are typically looking to add to their local portfolio because they are comfortable with the real estate economics and the local healthcare environment. But we have recently seen many other types of buyers enter this market such as institutional, family office and foreign buyers. Additionally, many multifamily and retail investors are placing their 1031-exchange money into medical. All of this activity has affected pricing, pushing it to an all-time high.”

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