New Jersey Healthcare

2Q 2023 Report

Northern NJ


Medical Buildings

51,438,235 SF


$22.30 PSF

Base Rent

Bergen County


Medical Buildings

7,623,968 SF


$25.53 PSF

Base Rent




17,726 SF | $7,300,000

575 Kent Place, Livingston, NJ

Buyer:  Alexander Brachfeld

Seller:  1201 Deerfield Terrace LLC; 

______ Walnut Realty LLC

14,048 SF | $3,860,000

33 Newton Sparta Rd, Newton, NJ

Buyer: Vinay Kundur

Seller: Skylands Realty LLC


34,000 SF 

490 State Route 57 W.

Washington, NJ

10,000 SF 

20 Commerce Blvd.

Succasunna, NJ

8,796 SF 

36 Newark Ave.

Belleville, NJ* (Renewal)

*Team Lizzack-Horning Transaction


The second quarter of 2023 saw increasing gains in the healthcare building sector, even as the economy remained somewhat volatile. A steady demand for healthcare will bolster the industry, keeping it strong throughout 2023 and 2024. 

By the numbers
In 2021, we saw rents soaring as demand increased and space remained in limited supply. 2022 ushered in record-setting sales volumes. Medical offices hit 19.5 million SF in Q4, doubling absorption rates from 2019 and earlier years. Q4 2021 saw vacancies hitting a high of 12.5% but dipping to 11% in Q1 2022 — since then, they’ve been slowly increasing, hitting 12% in Q2 of this year. 

The average asking rent has also risen steadily from just over $20 PSF in Q1 2020 (with a slight dip in Q4 of that year) to above $22 PSF in Q3 2022, dipping slightly to $22 in Q4. As of Q2 2023, rents averaged just over $22 at $22.30 PSF.

While the Fed continued to raise interest rates three times this year by .25% (from 4.50% to 4.75% in February, 4.75% to 5.00% in March, and 5.00% to 5.25% in May), the S&P 500 remained strong, with stocks doing well in Q1 and Q2. It had double-digit returns even with higher inflation and the three rate increases. 

However, according to UnitedHealth predictions, healthcare has been negative this year (-3 YTD in YOY growth), and an expected YOY EPS growth of -15.7% (and only 2.6% revenue growth) in June. For example, UnitedHealth’s earnings weight in the S&P 500 was 1.2% — aligned with the market cap weight of 1.2%.

A Deloitte report examined trends from Q4 2019 to Q1 2023, finding that investment in healthcare has increased nominally. About 55% of the overall investment in healthcare structures has gone to hospitals. While investment hovers below prepandemic levels, it is growing. Only special healthcare buildings have decreased (-34.4%), but other areas have seen increased investment: 
  • Healthcare structures (hospitals, medical buildings, special healthcare buildings): 10.1%
  • Hospital buildings: 9.8%
  • Medical buildings 29.7%

Looking ahead to Q3 and Q4
Expect investors to proceed with caution. There’s plenty of cash sitting on the sidelines (and invested in money market funds) — where it may stay for a while as investors  strategize and build their shopping lists. They will have plenty of money to spend when they deem the time suitable.

The curve is still inverted, signaling a recession. But we’ve heard the recession speak for a while, and it hasn’t fully materialized. Some economists say the case for a recession is losing strength since the job market remains hot, but caution a recession could happen in 2024 after the full effect of the Fed’s rate hikes kicks in.

In short, healthcare remains a favored sector. The Russell 1000 sector performance has seen good healthcare performance even following other yield curve inversions. And while it’s lagging this year, it does provide a solid entry point into a recession-resilient, reasonably-priced sector.

We’re seeing higher interest rates, inflation, and stock valuations in this post-Covid era, so it’s hard to say whether the Fed will make more moves to actively fight inflation rather than sustain the economy. If so, that approach might not spell good news for financial markets — but only time will tell.

Other industry predictions include: 
  • The healthcare asset with the highest transaction volumes has switched from nursing homes to assisted living — a trend that will continue, for now.
  • Conditions remaining ripe for megamergers as stable, larger healthcare systems increase scale to offset financial headwinds.
  • Non-traditional partnerships in M&A have increased, with more divergence between value-based and fee-for-service care entities.
  • Health systems continue to partner with technology firms to bolster supply chains, improve care outcomes, and reduce workflows.
  • Health systems are making capital investments to address and mitigate care model inefficiencies and find and maximize new revenue streams. Those systems slowing or halting capital investments in 2020 through early 2022 continue to play catch-up.

Darren M. Lizzack, MSRE

(201) 906-4376

Teterboro, NJ | 201 488 5800

Parsippany, NJ | 973 463 1011