Medical Office Building Investments

Class A MOBs are rapidly gaining popularity among physicians and other healthcare providers. In particular, occupying a shared facility enables doctors to lower overhead costs and devote more funds toward improving other aspects of their practice. Shared facilities also allow physicians to have all of the services a patient may need in one location, including a pharmacy, lab work and radiology. This setup makes appointments more convenient for the patient and doctor.

In addition to lower overhead costs and greater convenience, Class A MOBs generally offer access to more amenities than stand-alone medical office spaces. For instance, a physician may be drawn to a hospital-affiliated Class A MOB for the sake of the technological advances in record-keeping and medicine, along with other resources it offers that make running a practice an easier and smoother process.

These are a few of the most sought-after perks a Class A MOB might provide:

• Electronic record storage: Going paperless is remarkably beneficial for medical offices because file and record storage takes up expensive leased space. Storing records electronically also allows them to be sent to other specialists more easily.
• Digital imaging: Digital imaging via satellite is quickly becoming a valuable technology in the medical world. Class A MOBs use this technology to enable a practitioner to send a digitized result to a specialist for their opinion, saving the time and expense it would take for the patient to travel to the specialist’s office.
• Satellite offices: Many physicians try to rotate offices throughout the week to make themselves more accessible to a broader audience of patients. Class A MOBs are especially appealing as rotation locations because they can be found in downtown districts, suburbs and other convenient hubs.

Healthcare property investors need to be aware of these benefits and recognize the rising interest in Class A MOBs. These factors also indicate a potential increase in downtown and neighborhood medical offices, with new construction most likely to occur in city or suburban neighborhoods.

MOBs that meet the Class B and Stand-alone qualifications tend to be similar in the sense that they may be the only space available for medical tenants near smaller medical centers. However, Class B MOBs usually offer practitioners greater benefits, such as better ingress and egress, along with more independence for practices.

Class B MOBs also boast extensive outpatient services, resulting in many Fortune 500 companies that provide medical services fighting over Class B MOB assets. In fact, a standard Class B MOB rent roll may include well-known healthcare organizations like Roche, Baxter and SmithKline Beecham. These big-name tenants often attract medical office building investors.

Due to the extensive benefits of Class A and B office spaces, the demand to decrease overhead and the Tax Reform Act of 1986, which eliminated much of the tax incentive for individual ownership, stand-alone MOBs have been progressively falling out of favor with physicians and investors alike.

However, stand-alone MOBs still have their place. Certain specialists and general practitioners often do not require the elaborate services that Class A and B MOBs boast and dialysis or urgent care centers are still popular stand-alone properties for investors. In addition, physicians usually qualify for commercial loans and can typically afford down payments. Financially savvy physicians and healthcare property investors might be intrigued by assets like a multi-tenant building that can offset rental costs and generate positive cash flow.

Technology is rapidly evolving and ever-changing, making it imperative for an MOB to have an adaptable office management structure. If a modern healthcare practice wants to be successful, it needs to be located in a building that allows technological transitions to occur smoothly. Specifically, the offices need to be managed in a way that is cutting-edge, organized and orderly without being rigid.

For instance, an MOB can optimize its office management structure in the following ways:

• Universal procedure and exam room sizes that can serve different purposes
• Incorporating new technologies such as video calls that enable healthcare providers to accommodate patients virtually
• A modular design rooted in traditional planning that can use prefabricated construction methods
• Replicable planning strategies that can be used at varying scales

Location is always a vital element in real estate. In fact, location might be the most important factor when evaluating your medical office building investment options. An MOB that is on or near main roads will naturally receive more traffic and enhanced visibility that results in more business. Similarly, you will want the property to be in a high-population area that grants potential patients easy access to the facility. Convenience is a huge draw for patients, making a central location crucial for medical offices.

You will also need to think about the geographic location of your MOB asset carefully before purchasing the building. States with mild climates year-round, such as California, Arizona and Florida, tend to attract more baby boomers and families with active lifestyles. Both of these populations have a higher need for medical care, making an MOB asset in these locations a wise investment.

Finding a prime location is critical because a noteworthy location is more likely to attract high-quality healthcare providers than a property that is not ideally located. Since healthcare providers are also looking to make money, they will search for offices in places with maximum exposure. Naturally, if a healthcare center has high-quality healthcare providers, it is more likely to be a profitable investment.

If you are interested in purchasing an existing medical office space, you will need to pay special attention to the facility’s size. Here are a few essential questions to ask about the building’s size:

• How many healthcare providers can the building hold?
• How many patients can the facility’s waiting area sit comfortably?
• Does the property have lab facilities on-site or the capacity to add lab facilities?
• Does the building provide enough space for imaging technologies?
• How many parking spots are included on the premises?

Along with considering the building’s current size, you will want to think about whether the facility has the capacity for expansion. Is there enough land to accommodate a larger building if you decide to expand it in the future? A smaller property with plans for expansion can often be more appealing to healthcare providers than a larger facility with no more room to grow.

Investing in MOBs usually requires professional knowledge of tenant necessities, which can range vastly from one practice to the next. Some tenants might need specialized equipment, such as medical imaging machines or oxygen concentrators to run their practice efficiently.

Factors such as electrical demands and setup requirements are also essential considerations. Medical facilities often need to power many machines and have access to sinks and other water sources throughout the building. Purchasing an MOB requires a vast knowledge of the needs of tenants in order to remain operational.

Investors can rest assured knowing investment in MOB properties is still possible without an expansive and specialized knowledge of medical office operations. 1031 Crowdfunding offers turn-key solutions to invest in MOBs through Delaware Statutory Trusts (DSTs). DSTs allow accredited investors to acquire an asset while leaving property and asset management to the experts. DSTs are attractive to many investors due to the prospect of passive management and income. Investing in DSTs also makes MOBs eligible for a 1031 exchange.