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Northern NJ
3,331 Medical Buildings
52,565,312 SF RBA
$22.23 PSF Base Rent |
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Bergen County
477 Medical Buildings
8,177,597 SF RBA
$25.80 PSF Base Rent |
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SALES
11,235 SF | $2,700,000 80 Bloomfield Avenue, Caldwell, NJ Buyer: Borough of Caldwell Seller: Zetlin & DeChiara LLP
25,986 SF | $2,500,000 313 South Avenue, Fanwood, NJ Buyer: Steve Needle Seller: John Boyle
2,791 SF | $570,000* 180 N. Dean Street, Englewood, NJ Buyer: Hahn Properties LLC Seller: Lambs Lane Holding LLC |
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LEASES
9,814 SF 1542 Roosevelt Avenue Carteret, NJ
9,600 SF 769 Northfield Avenue West Orange, NJ
5,000 SF 1455 Broad Street Bloomfield, NJ
2,180 SF* 201 Rock Road Glen Rock, NJ |
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*Team Lizzack-Horning Transactions |
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Healthcare facilities are aging. According to the Office of Energy Efficiency and Renewable Energy, about 50% of commercial buildings (2.8 million) were built before 1980. Why does outdated infrastructure pose a problem? Because existing systems in these buildings weren’t designed to support the demands of modern smart technologies. To continue delivering best-in-class service with state-of-the-art technology requires significant upgrades: - Modernizing IT infrastructure to handle increased data flow and connectivity needs.
- Implementing advanced energy management systems to improve efficiency and cost savings.
- Updating mechanical systems to deliver optimal performance and integrate with smart controls.
- Adding sensors and data sensors to facilitate the integration of smart space utilization systems.
By strategically upgrading their infrastructure, aging medical office buildings (MOBs) can modernize and thrive in today’s and tomorrow’s healthcare environment. Building owners should focus on essential upgrades that address current limitations and enhance functionality.
Those upgrades might include improving accessibility. Install ramps, wider doorways, and accessible restrooms to comply with regulations and cater to a broader patient base. Upgrade wiring and servers to handle the growing demands of electronic health records (EHR) and telehealth services. Implement LED lighting, smart thermostats, and efficient HVAC systems to reduce operating costs and environmental impact.
Where feasible, older buildings should be retrofitted to incorporate smart technologies. Building automation systems can handle lighting, temperature control, and security for improved efficiency. Sensors can optimize space use by tracking room occupancy and streamlining patient flow in real-time.
Older buildings (and new construction) should create spaces adaptable to future needs — perhaps modular walls or movable furniture to accommodate changing practice specialties or service offerings. Owners should plan for expansion by ensuring infrastructure supports additional equipment or increased data flow. Architects and designers should incorporate sustainable materials and practices during renovations, which can improve energy efficiency, attract eco-conscious tenants, and potentially qualify for tax credits.
Prioritize upgrades with a clear ROI. Analyze energy savings, improved operational efficiency, or increased rental potential to justify costs. Explore funding options like grants, tax incentives, or partnerships with healthcare providers to manage upgrade costs.
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By the Numbers
According to several reports, investments in MOBs have continued to decline, falling 21% year over year in Q1 2024 (the numbers for Q2 aren’t out yet). But, despite a slowdown in investment activity, medical office space remains a seller’s market in terms of pricing and construction.
In fact, New Jersey leads the way nationally — its MOB pipeline has 965K sq. ft. of construction underway. These projects are expected to boost total inventory by 5.4%, positioning the state as one of the country’s fastest-growing markets in this sector. The following factors are likely fueling this robust development:
- NJ boasts a well-developed healthcare industry with over 2K licensed hospitals, nursing homes, and medical facilities.
- The state’s healthcare sector employs nearly 500K people, solidifying its status as a major East Coast healthcare hub.
- This strong foundation of healthcare infrastructure and personnel translates to a high demand for medical office space, justifying the significant MOB pipeline in development.
Rents continue to climb or remain consistent. Average triple-net asking rents rose 0.5% in Q1 2024 compared to the previous quarter and 1.3% YOY, reaching $24.70 PSF. In Q2 2024, the base rents increased by nearly $2 PSF in Bergen County but remained static in Northern NJ.
Bergen County - 477 medical buildings
- 8,177,597 SF RBA
- $25.80 PSF base rent
Northern NJ - 3,311 medical buildings
- 52,565,312 SF
- RBA
$22.23 PSF base rent
Healthcare M&A Settling into a New Rhythm According to Bloomberg Finance L.P., the pace of M&A activity within the healthcare space has returned to a more typical pattern than the period of intense consolidation following the pandemic. The past three years have seen a rise in smaller deals, with deal volume increasing even as the average transaction size remains modest.
This uptick in smaller M&A deals suggests a shift toward consolidation at the local level or within specific specialties. For physician practices, this trend could mean: - Increased competition from larger healthcare entities, like private equity-backed platforms and established health systems.
- Potential opportunities for smaller practices to partner with others or become more attractive acquisition targets for larger players seeking strategic expansion.
To navigate this evolving healthcare environment, physician offices should carefully consider M&A as a strategic option alongside their organic growth plans. In today’s market, achieving growth often requires reaching a certain size. |
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Teterboro, NJ | 201 488 5800 Parsippany, NJ | 973 463 1011 |
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