Transaction volume for healthcare real estate stalled in the latter half of 2022 as rising borrowing costs and mounting economic uncertainty pushed investors to the sidelines, according to a new report from JLL.

While medical office deal flow was buoyed by the merger of Healthcare Realty Trust and Healthcare Trust of America, quarterly transaction volume for the last two quarters of the year dropped sharply amid several hikes of the federal funds rate. Spreads between the 10-year Treasury and MOB cap rates also narrowed, dropping from 400 to 500 basis points in 2019-2021 to just over 230 basis points in Q4 2022.

"Cap rates have been impacted by rising treasury rates and rising costs of borrowing," the JLL report notes. "In our investor survey 76% of respondents indicated that they expected cap rates to rise in the next 12 months. Cap rates are still low compared to historical levels, despite rising 50bp heading into January 2023."