Steve Stiloski, MAI, CCIM, MRICS - WAAO€¦ · Steve Stiloski, MAI, CCIM, MRICS •“The greatest buying challenge is the lack of good, institutional-grade product,”says a participant

Steve Stiloski, MAI, CCIM, MRICS


• “More than 120 medical office building (MOB) properties valued at $1.8billion were sold in the first half of 2013.”

• “A total of 171 MOB properties sold during the calendar year 2013 at anaverage value of $13.2 million, or $161/SF. In comparison, of the 124 MOBssold so far this year, the average value was $14.8 million, at an average price of$197/SF.”

• “Investors appetite for this asset class of choice remains as strong as it hasbeen since the start of 2012.”

• “During the recession, investors came to realize that the income-producingqualities of this class of real estate are very stable. This is driven principally bythe fact that you have physicians and hospitals in long-term leases, and theytend not to move.”


• “The greatest buying challenge is the lack of good, institutional-grade product,” says a

participant. In some cases, the shortage of supply has led to an escalation in pricing.

“The continued lack of core, Class-A MOB product for sale results in premium pricing

when these assets hit the market.”

• “In the first quarter of 2014, the average overall cap rate slipped to 7.68%, the

lowest seen since the MOB market debuted in our Survey in midyear 2008.”

• “Survey results indicate that rising values in this market primarily result from

falling cap rates rather than growing rental rates.”

-PwC Real Estate Investors Survey

First Quarter of 2014





• Larger sized exam rooms is becoming a common trend.

• As the collaborative care model is becoming more prevalent, designers have beenlocating nurses’ stations and physicians’ offices close to each other (or eliminating privateoffices all together) to provide shared work areas and more opportunities forcommunication.

• National healthcare discussions is placing a great emphasis on containing costs,preventative care, wellness, and managing chronic disease. By 2014, approximately 40million more Americans will have access to health insurance placing more demand offacilities and building infrastructure.

• Flexibility, efficiency, and patient experience are the new operative words in healthcaredesign today.

-Healthcare Design Magazine


21700 Intertech Drive

Brookfield, WI

Sale Date: June 2013

Sale Price: $8,435,000

Net Rentable Square Footage: 20,689

Sale Price/SF: $404.16

Cost New: $4,390,000 or $212.19 per SF

Site Size: 2.85 Acres

Year Built: 2008

Capitalization Rate: 6.74%


2315 East Moreland Drive

Waukesha, WI


Sale Price: $12,350,000



Cost New: $6,190,000 or $205.68 per SF


Year Built: 1980 (renovated in 2009)



4475 South 108thStreet

Greenfield, WI





Cost New: $4,230,000 or $202.68 per SF


Year Built: 2011



13800 West North Avenue

Brookfield, WI

Sale Date: September 2013




Cost New: $4,420,000 or $200.49 per SF


Year Built: 1989 (renovated in 2007)



3610 Michelle Whitmer Drive

New Berlin, WI

List Price: $5,700,000


List Price/SF: $223.84


Year Built: 2005


Occupancy: 86%


350 South Waukegan Road

Deerfield, IL

List Price: $7,350,000


List Price/SF: $223.84


Year Built: 2013


Occupancy: 100%



• As the baby boomers retire, the over 65 age bracket will grow by 36% and that age

cohort traditionally consumes three times the medical services of younger people.

• Under the Patient Protection and Affordable Care Act, signed into law in 2010, 32

million additional Americans will have health insurance. This represents an 11%

increase by 2019. Job creation among healthcare practitioners will likewise mirror this

expanded patient base.

• A new model of healthcare health systems are embracing is also creating demand.

Health providers are migrating to a hub and spoke model which hinges around outpatient

care. By acquiring and constructing medical facilities like advanced imaging centers,

physician offices, and satellite emergency departments, health systems can strategically

coordinate a network of support to cater to the needs of their community.


• These and other factors will increase the demand for medical office buildings by

19% by 2019. There is need for an estimated 64 million square feet of additional

MOB space in the coming decade.

• Heightened demand for modern and more efficient outpatient medical office

space is generating an uptick in both ground-up development and renovation of

existing buildings. Many health care providers are repurposing vacant retail space

in malls and shopping centers.

• Medical office brokers have reported a recent increase in RFPs for health-care

real estate projects as vacancies in higher four and five star medical office space has

fallen from about 11.5% in late 2009 to 10.5% as of third quarter 2013, and more

than 8.23 million square feet of new medical office space is under construction.



Commercial Property Consultants

[email protected]

262.677.9092

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Steve Stiloski, MAI, CCIM, MRICS - WAAO€¦ · Steve Stiloski, MAI, CCIM, MRICS •“The greatest buying challenge is the lack of good, institutional-grade product,”says a participant