MOB Development Market Reaches $7.7B

Some 19.4 million square feet of outpatient medical real estate projects came online in 2016, according to a research study conducted by Revista and HREI.

Arnold, Md., and Minnetonka, Minn.—Not all healthcare real estate is created equal, and real estate research firm Revista and Healthcare Real Estate Insights magazine home in on a particular segment of the sector. According to their new Outpatient Healthcare Real Estate Development Report, 19.4 million square feet in outpatient medical real estate development projects came online in 2016, reaching nearly $7.7 billion in construction value. Another 17.3 million square feet of outpatient projects with a value of almost $6.5 billion were started, so the segment is clearly worthy of the spotlight.

U.S. Department of Veterans Affairs Health Care Center in Kernersville, N.C.
U.S. Department of Veterans Affairs Health Care Center in Kernersville, N.C.

“With more and more healthcare being delivered in an outpatient setting, it has grown increasingly important to be able to distinguish between the levels of inpatient and outpatient healthcare real estate development,” John Mugford, editor of Healthcare Real Estate Insights, said in a prepared statement.

Revista and HREI surveyed outpatient HRE projects valued at a minimum of $2.5 million and containing at least 5,000 square feet of new or renovated space. And they looked at much more than just medical office buildings and urgent care centers. The partners’ research included outpatient surgery centers; dialysis centers; clinics; freestanding emergency rooms/departments; imaging centers; retail medical buildings and other purpose-built medical facilities where outpatient services are provided.

A whopping 36.7 million square feet of outpatient facilities delivered or commenced in 2016, and developer Pacific Medical Buildings led the way with six projects totaling 465,000 square feet. Healthcare facilities developer NexCore Group came in second with six projects totaling approximately 461,200 square feet. However, healthcare developers didn’t dominate the list of the most active producers. Commercial real estate firm Trammell Crow Co. took the number three spot, having completed or commenced nine outpatient properties totaling roughly 424,100 square feet last year.  Duke Realty, which specializes in MOBs and industrial assets, was the fourth top developer with 385,000 square feet of projects. Concord Healthcare rounded out the top-five list with 383,000 square feet of completed and in-progress developments.  And Lendlease, which ranked seventh, was responsible for bringing the single largest outpatient facility to the market last year, the 280,000-square-foot, $130 million U.S. Department of Veterans Affairs Health Care Center in Kernersville, N.C.

The outpatient HRE report is a freshman effort for Revista and HREI, but as the first independently verified research project to explore exclusively the size of the outpatient HRE development market and its most active developers, it probably won’t be the last. “This more sophisticated research project answers key questions about the outpatient medical real estate development market in a more meaningful way,” Mugford said.