NEW YORK–Following a sharp 33% drop in growth during the first three months of 2019, the US medical office sector recovered in the second quarter, reducing activity to a 5% year-over-year decline, according to a Real Capital Analytics report.

However, this improvement was largely impacted by a particular deal in June, in which Welltower purchased a portfolio of 50 medical office buildings from CNL Healthcare for more than $1 billion. Without this substantial transaction, second quarter activity would be down 36% year-over-year, RCA says.

This significant deal offers misleading headline figures, as the individual asset sale volume still fell 32% year-over-year in the second quarter. Though the steady decrease in numbers does not necessarily validate the sector’s future.

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Considering the majority of medical offices are situated in suburban areas, the asset pricing often relates to suburban offices overall.

The average cap rate for suburban offices is 7%, while medical office cap rates in the second quarter of 2019 remained lower, averaging 6.6%. However, medical office cap rates were much more similar to suburban asset cap rates, earlier in the cycle.