Nationwide merger and acquisition activity in the medical office building (MOB) sector decreased by 23% in the third quarter from the second quarter, with 44 publicly announced transactions, according to data from New Canaan-based LevinPro HC. The third quarter also recorded a 27% drop in M&A activity compared with the year-ago quarter, when 60 MOB acquisitions were announced.
Announced spending in the third quarter decreased by approximately 49% from $380.6 million in the second quarter to $194.7 million in third quarter. The largest MOB deal by disclosed price was Sila Realty Trust’s acquisition of a 104,912-square-foot MOB in Burr Ridge, Illinois for $59.95 million.
During the third quarter, only a few states saw a significant concentration of M&A activity in the MOB sector, with Tennessee recording the highest number of transactions with six deals, accounting for 13.6% of the sector’s total. Arizona followed with four deals and New York with three.
“Health care real estate M&A has been rising steadily over the past several years, but it seems to have hit a slowdown in this most recent quarter,” said Avery Swett, an analyst at LevinPro HC. “Instability in the capital markets, in addition to the higher interest rates, has hampered the MOB M&A market in the last year, causing deal activity and dollar volume to both significantly decline. Right now, there is a lot of uncertainty surrounding the healthcare real estate and lending market in 2024. Much of its future performance will depend on the Federal Reserve and how it handles the eventual decline in interest rates.”
Looking ahead, Sweet forecasted “a lot of uncertainty surrounding the health care real estate and lending market in 2024. Much of its future performance will depend on the Federal Reserve and how it handles the eventual decline in interest rates.”
