Between three of Atlanta's top health care providers, more than $2 billion of new construction is underway: Piedmont Atlanta Hospital's $603 million Marcus Heart and Vascular Center; Children's Health Care of Atlanta's $1 billion-plus pediatric hospital in northeast Atlanta; and Northside Hospital's $525 million expansion in five locations throughout the city, including a new medical office tower in Midtown scheduled to open in 2018.

“The evolution of medical technologies is boosting demand for newer product with the infrastructure capable of handling cutting-edge devices and systems,” Jim Hayden, executive managing director, Healthcare, Global Workplace Solutions, CBRE, tells GlobeSt.com. “Medical office space that helps providers minimize costs and maximize outcomes, including buildings that support collaboration and can accommodate new technologies that help them achieve these goals, will likely remain in favor.”

Medical office cap rates have consistently decreased from a high of 8.3% in mid-2010 to 6.8% as of the first quarter of 2017. On a regional basis, average cap rates have been lowest in the West over the past seven years, below the US average by about 60 bps. However, the spread between the highest and the lowest regional cap rates remained relatively tight during this period, as industrywide trends have a similar impact across the various markets.

“Comparatively moderate regional differences are an attractive feature of medical office as an investment class,” Lee Asher, executive vice president, Healthcare, CBRE Capital Markets, tells GlobeSt.com. “Because there is demand for healthcare everywhere, investors are generally more willing to look outside the primary markets compared with traditional office investment, and this is apparent in pricing metrics.”