Medical Office Deals Flourish While Healthcare M&A Slows in Q1
Industry experts, though, believe there will be slowdown for the remainder of 2023.
Demand in the medical office building and healthcare real estate market is higher than ever, according to Dylan Sammut at Irving Levin Associates.
Meanwhile, healthcare merger and acquisition activity slowed in the first quarter of 2023 but remained high, according to Levin’s new report.
Aging demographics are calling for specialized medical facilities and properties, which has kept activity flowing while other sectors have slowed, the report showed.
Merger and acquisition activity in the medical office building sector increased by 13.7% in Q1 23 – a quarter that had a 5% increase in activity compared with Q1 22 when 55 MOB acquisitions were announced.
“Industry experts we’ve spoken with fear there might be a slowdown due to rising interest rates and other headwinds,” Sammut said in a prepared statement. “But the healthcare real estate market is resilient, and there are few better investments in the industry.”
The largest MOB deal by disclosed price was Big Sky Medical Real Estate’s acquisition of a 10-property medical office portfolio for $190 million.
Tennessee recorded the highest number of transactions with 11 deals, accounting for 19% of the total. Following close behind was California with seven deals, Illinois with six, Florida with five, and Texas with four.
The busiest acquirer in the MOB market during Q1 23 was Montecito Medical, with 11 deals, encompassing 261,307 square feet across the United States.
A Slowdown Predicted for 2023
There were 633 health care merger and acquisition deals announced in the first quarter, a 6% drop from the fourth quarter of 2022 total of 611 deals. The first-quarter activity was also 20% lower than the opening quarter of 2022.
Other Services and Physician Medical Groups sectors drove much of the deal closings, with 136 and 132 deals, respectively.
“Private equity continued to dominate the physician market as buyers, and investors swarmed the healthcare real estate market, looking to capitalize on the rising demand of outpatient care and aging demographics,” the Levin report said.
According to Sammut, the Industry experts they’ve spoken with predict a slowdown in 2023 compared with last year. “Inflation, rising interest rates, and labor costs are hitting the entire industry, which could force dealmakers to hit pause for now, or at the very least, let their foot off the pedal,” he said.