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Northern NJ
3,273 Medical Buildings
52,900,086 SF RBA
$22.24 PSF Base Rent |
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Bergen County
470 Medical Buildings
7,958,746 SF RBA
$24.91 PSF Base Rent |
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SALES
11,800 SF | $3,300,000 385 Morris Avenue, Springfield, NJ Buyer: Atlantic Health Systems Seller: MAK Associates, LLC
8,226 SF | $3,250,000 79 Union Street, Montclair, NJ Buyer: Anthonya D Silva Seller: Fullerton-Union Property, LLC |
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LEASES
12,807 SF 556 Eagle Rock Avenue Roseland, NJ
9,020 SF 630 Broad Street Carlstadt, NJ
6,204 SF 1455 Broad Street Bloomfield, NJ |
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Healthcare remains a bright spot in the single-tenant office market, with
steady demand for medical offices and urgent care centers. Labs for
research and development supporting healthcare may also see ongoing
crossover demand. However, while healthcare office space remains a
hot property type, the trend isn’t extending to traditional office spaces
in high-rises, suburban parks, or corporate campuses.
Medical outpatient buildings remain a hot commodity in CRE. Their
stability and the ongoing need for healthcare make them a prime
investment opportunity. Diversifying investment portfolios with these
assets can yield robust returns in the coming years. On-campus medical office buildings (MOBs) fetch higher prices than
off-campus ones, with a typical premium of 25 basis points on cap
rates. Rising interest rates have driven MOB cap rates higher, but with
the Fed expected to cut rates this year, many investors are using lower
exit cap rates when valuing MOBs.
In one recent survey, half of investors expect exit rates to be 25-50
basis points higher than the initial cap rate, while the other half expects
a smaller spread of 0-25 basis points. Discount rates, however, are
expected to climb further, with respondents anticipating a spread of
75-100 basis points above the exit cap rate.
By the end of Q1 2024, these were Bergen County and Northern NJ
numbers, with rents increasing a few pennies per square foot.
Bergen County • 470 medical buildings • 7,958,746 SF RBA • $23.91 PSF base rent
Northern NJ • 3,273 medical buildings • 52,900,086 SF RBA • $22.24 PSF base rent
According to Forbes, the MOB market is booming, with a projected
annual growth rate of 10.4% through 2027. Located in convenient
medical corridors, MOBs offer top-notch facilities and easy patient
access, a significant advantage over traditional hospital campuses. Also
fueling MOB market growth? A shift in patient preference prioritizing
convenience over the more traditional visits — and attempts to navigate
— sprawling hospital campuses.
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Looking Ahead to 2024
The Federal Open Market Committee predicted during its December
2023 meeting that the Fed will cut interest rates three times in 2024,
bringing the federal funds rate down to 4.6% by year-end. However,
some experts caution that high interest rates in healthcare real estate
may linger. While this scenario creates a wait-and-see approach for
pricing and financing, interest rates should stabilize. With physician
retirements outpacing new graduates, labor shortages remain a
concern, however.
The outlook isn’t all gloomy. Experts point to a boom in mental
healthcare clinics and project the market will grow at a 3.5% CAGR
through 2029. As societal attitudes shift and demand increases, these
facilities are attracting significant investment. |
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Teterboro, NJ | 201 488 5800 Parsippany, NJ | 973 463 1011 |
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