The idea of real estate investment trusts (REITs) is not a new concept. Developed in 1960, REITs have been ebbing and flowing with national development for over half a century. But while the regulations of this type of investment have evolved, the principle is still the same—profitably investing in commercial real estate (CRE). Now, with the ever-changing developmental landscape, profiting from REITs is even more of a reality. And there is one sector of the CRE industry that is raising ROI expectations: medical office buildings (MOBs).
What Are REITs?
Real estate investment trusts are created by companies that own commercial (or income-producing) properties. These companies don’t buy the property to resell it. Instead, they hold on to the property as an investment and continue to generate income over time.
These trusts also provide an opportunity for individuals to invest in CRE without purchasing a commercial property on their own. There are two ways to invest: they can trade REITs in the stock exchange or invest in non-traded REITs. As with all investments, both publicly traded and non-traded REITs have their own sets of risks. But both kinds of REITs are advantageous options for those who are looking to diversify their investment portfolio and potentially see high dividends in the process.
Overall, CRE has an impressive record for ROI, and in recent years, the market has also seen consistent CRE price growth. These factors indicate that CRE is a viable type of investment. And none of the commercial property sectors are seeing the same kind of growth as MOBs.
REITs and Medical Office Buildings
National Real Estate Investor (NREI) recently released survey findings regarding REITs. For the last four years, NREI has been tracking survey responses for publicly-traded REITs. The survey asked respondents what type of properties were on their “buy” and “sell” lists. For the third consecutive year, medical office building REITs ranked third on the “buy” list. Meanwhile, MOB REITs ranked in ninth place on the “sell” list. These survey findings suggest that those who trade Real Estate Investment Trusts would be more apt to invest in MOB REITs and hold onto them.
Conversely, the same respondents listed retail REITs in the bottom three of all ten types to buy. And for the last four years, the majority of respondents have also ranked retail REITs at the top of their “sell” lists. Some even suggested finding new uses for old retail spaces. With this information, it’s safe to say that the scope of retail real estate is changing quickly.
Visit nreionline.com to see the top sectors for buying and selling in REITs.
Retail Merging with the Medical Field
Since 2017, malls have seen a 10% decrease in apparel retail leases. In that same period, there has been a 60% increase in medical clinics in malls. Now, more retail spaces are integrating medical facilities to fill the gap. In one recent example, Mall of America (the largest mall in the U.S.) has announced plans to open a walk-in clinic spanning 2,300 square feet. Clinics like this one provide a captive audience that could help increase mall traffic. The addition of medical facilities is a positive direction for retailers and could significantly increase their profitability.
Last year, Americans spent over $3.5 trillion on healthcare alone. The U.S. now has the highest health spending of any developed country. The money is mostly paying doctors, clinics, and hospitals. Where there is an increase in medical needs, there is a significant need for medical real estate. Naturally, investors see the opportunity to jump on board.
REITs are already an ideal way for investors to explore returns from a variety of commercial properties. But one sector stands above the rest. Survey results, industry income numbers, and the landscape of CRE all point to the growing strength of MOB Real Estate Investment Trusts.
