CBRE Investment Management is looking to cash in on the medical office sector, a real estate market the brokerage’s managed fund sees as recession-proof. CBRE Investment management announced that it’ll acquire a four-building medical office portfolio totaling more than 282,680 square feet in Orange County, California. The office buildings were part of the Healthcare Trust of America portfolio, which recently merged with Healthcare Realty Trust to establish the biggest medical office building owner in America.
Like life sciences, CBRE says the medical office sector is a winner because America’s aging population and the pandemic have increased national spending on healthcare. The managed fund’s strategy focuses on medical office assets located within or adjacent to thriving hospital systems, and another CBRE fund began investing in the sector in 2017. Medical office has high barriers to entry because of the complexity of the assets, leading to an undersupply of state-of-the-art buildings, according to Sondra Wenger, head of Americas commercial operator division, CBRE Investment Management.
Medical offices have proven resilient throughout the pandemic, with vacancies averaging two percent lower than traditional offices. Part of the reason why is that the work of medical practitioners often requires an in-office presence. CBRE Investment Management expects medical office assets to outperform the office market overall. As CBRE’s investment shows, acquiring some on-campus or campus adjacent medical offices could be an excellent strategy for real estate owners looking to diversify and stabilize their office portfolios.