Boston Metro Medical Buildings May See Investment Boom

Commercial real estate investors in the Boston Metro are seeking medical office buildings as a recession hedge, according to a recent article by Boston Bisnow. Investors nationwide have flocked to medical office buildings for a number of reasons, including defense against economic uncertainties, aging consumer demographics, and public demand for medical services.

Medical buildings have the advantage of tenant stability, with long-term leases being common. Typically, medical businesses are not prone to relocate without a great deal of consideration. However, a medical tenant may be driven to relocate out of a need for expansion, or in the case of a building becoming functionally obsolete.

Investors previously banked on the warehouse sector, where opportunities seemed limitless during the e-commerce boom. Today, recession fears weigh upon the warehouse sector as consumer spending slows. Investor concerns have been magnified by Amazon’s plans to sublease over 10 million square feet of warehouse space, which could impact warehouse vacancy rates in multiple cities.

The investment opportunity in medical office buildings is lucrative, but it is also competitive. Investors spent $15.4 billion on medical space during 2021, and major players are leaving no stone unturned in the quest for properties. Medical office buildings in suburban areas are popular choices, where older Americans – who statistically spend more on health care – are apt to reside.

The Boston Metro’s plethora of healthcare systems and life science companies makes it a popular city for medical building investment. The ongoing investment activity in Boston Metro commercial real estate bodes well for local market conditions as a whole, even as certain sectors face adjustment in demand.

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