PHC 1st Quarter 2022 Real Estate Newsletter

The Pinnacle Real Estate Group consists of a combination of professionals who use their extensive experience in both valuation and transaction services within the healthcare real estate industry to guide clients through multiple types of arrangements in a time-efficient and cost-effective manner.

This Newsletter covers recent activity and conditions specifically impacting the national healthcare real estate market and those who are learning how to succeed in it.  The Pinnacle Real Estate Group has compiled the following current market information from sources such as CoStar, CBRE, and HREI.

Healthcare Real Estate Transactions and New Construction

Life Science Firm, Seagan, Plans for 270,000 Square Foot Facility in Everett, Washington

The new facility which Seagan will commit to a long term lease is scheduled to be completed in 2024 and will office approximately 200 works will be focused on manufacturing the company’s cancer treatment medicines. The Seattle area is on of the nation’s 12 largest biotech clusters where the pipeline of life science projects has reached approximately 25 million square feet.

Montecito Medical Acquires MOB in Hazelton, Pennsylvania

The 73,255 square foot, multi-tenant, two story building is 100% leased to Lehigh Valley Health Network.  The building includes a 13,500 square foot ASC.  The purchase price was not disclosed but believed to be approximately $29.2M in a transaction where Montecito partnered with AEW Capital Management.

PMB & Dignity Health Break Ground on a 45,000 SF MOB in Gilbert, Arizona

The two story project is the third MOB located near the Dignity Health Mercy Gilbert Medical Center developed by PMB.  The new facility is scheduled to be completed in 2023 will include Dignity Health East Valley’s graduate medical program and supporting imagining services via Arizon Diagnostic Radiology.  The building is designed in a cost-effectie manner to ensure rents are close to market.

A $650M Business Investment Project For Development of a 500,000 Square Foot Biomanufacturing Facility in Manhattan, Kansas

Governor Laura Kelly announced her administration’s most significant economic development project to date. Scorpion Biological Services, a subsidiary of Heat Biologics, Inc., is commencing on a planned development of a new 500,000 square foot biomanufacturing facility in Kansas. The $650 million business investment project will create 500 new, high-paying jobs in Manhattan within the next seven years and support the development of vaccines.

Healthcare Real Estate Trends

MOB Sales: Estimated more than $3.8B in Q1 2022 concludes highest 12-month total

The first quarter of 2021 for MOB Sales was not impressive with a $2.1B total.  However, the final total for 2021 was $18.3B which is 15.3% higher than the next highest total confirmed by Revista ($15.5B in 2017).  The first quarter of 2022 has continued that path with preliminary numbers indicating a volume of $3.8B, which is up 90% form first quarter 2021 and the second highest first quarter MOB sales recorded by Revista since the record of first quarter 2017 ($3.9B).  This strong start to 2022 has totaled more than $20B in the past 12 months, which is the largest volume recorded by Revista for such a timeframe.

Pinnacle Real Estate Group Assessment

The Second Quarter 2022 Likely to Continue on its Impressive Path

The healthcare real estate industry for First Quarter 2022 continued on the unprecedented momentum generated in the past three quarters.  With the current reality of inflation, the ongoing issues with global supply chain issues, the war in Ukraine, combined with the First Quarter 2022 of the overall economy showing signs of a looming recession the healthcare real estate industry continues to show resiliency and maintain on its impressive path.  In the past few months, the sector of healthcare real estate that has firmly grabbed the baton and is clearly leading the industry are Life Sciences, or sometimes referred to as BioTech.  Life Sciences Real Estate (LSRE) is generating its own momentum and demanding attention throughout the entire healthcare real estate industry.  Life Sciences involves the study of living organisms: biology, botany, zoology, microbiology, and other related subjects such as biotechnology, pharmaceuticals, medical devices and therapeutics.  LSRE facilities will typically involve a combination of office, lab, and Research and Development (R&D).  Venture capital funding in U.S. life sciences has grown 328 percent during the last five years which included $32.5 billion in 2021.  There is currently 172.5 million square feet of LSRE in the U.S. with a current vacancy rate of 4.8% that raised average annual rental rate to $67.05 per square foot and cultivated 31.6 million square feet of new construction projects.  Investments in LSRE reach $21.4 billion in 2021, which is 62% increase from 2020.  We believe LSRE will aggressively continue on this path for the foreseeable future and continue to lead healthcare real estate on its impressive trend.

For more information, please contact:

Mike Vandaveer, Director

720-599-7883

MVandaveer@AskPHC.com

Chris Louis, ASA, MAI, Director

720-598-1439

CLouis@AskPHC.com

Tony Price, Analyst

720-386-3540

TPrice@AskPHC.com