Healthcare vital signs: Physicians who own their real estate

What is true right now

Your building is probably worth more than the last number you heard.

Provider-owned medical assets traded at average cap rates of 7.8% to 8.0% over the past 12 months. REIT and health-system product traded at 6.3% to 6.4%. That gap is not about the quality of your building. It is about lease structure, term and documented rent, and all three are things you can shape before you ever go to market.

On a property producing $400,000 of NOI, the difference between a 7.9% and a 6.5% cap rate is roughly $1.1 million of value. That is not a threat. That is a million dollars sitting inside decisions you control.

The market you built in is the tightest occupier market of the cycle, and that works in your favor as an owner.

Occupancy is at a cyclical high, national supply growth is 1.1%, and space per healthcare employee keeps falling.

For an owner, scarcity is leverage. The building you already control is the one asset in your practice a payer cannot deny and a hospital cannot take without your consent. If a transition is somewhere on your horizon, the plan for the real estate deserves to be made on your timeline, not someone else's.

If you are thinking about growth, the space math is worth understanding early.

Practices adding providers, adding service lines or opening a second location are looking for space in a market where absorption has outrun completions for three straight years.

Knowing that going in is an advantage. It means site control belongs earlier in your planning than it did three years ago. Starting that conversation now is simply good positioning.

Where the opportunity is

The monetization window is open, and private capital is holding it open.

Private and investor buyers acquired 78% of all medical office building dollar volume over the past year. That is a deep, motivated pool for exactly the asset a physician group owns: a well-occupied medical building with a credible tenant.

Cap rates have been stable for four quarters, so a seller today is working from real pricing rather than a guess.

A sale-leaseback turns illiquid equity into practice capital without giving up your location.

You keep the space, set the lease term and control the renewal options, while releasing capital that can fund partner buyouts, equipment, an ASC investment or your own retirement.

With rents at series highs, the lease you write today supports a stronger valuation than one written three years ago.

You are not selling the building out from under yourself. You are putting it to work.

REITs are selling, and that brings buyers to your door.

REIT dispositions of $8.3 billion against $0.5 billion of acquisitions have pulled a wave of private buyers into the sector who need product to place.

Competition among those buyers is what produces a strong bid on a well-structured physician-owned asset. Their need is your leverage.

Learn more about Northmarq's National Healthcare Group

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