U.S. Economic and Medical Office Market Overview and Outlook. November, 2014

Transcription

1 2014 U.S. Economic and Medical Office Market Overview and Outlook November, 2014

2 Economic & Demographic Overview

3 U.S. GDP Growth and Health Care Spending Trends GDP Health Care Expenditures Annualized Quarterly Percent Change 10% 5% 0% -5% -10% * * Through 3Q Sources: Marcus & Millichap Research Services, BEA

4 Quarterly Employment Steady Full Recovery of Jobs Lost in Recession Quarterly Job Growth (Millions) Year-to-Date Job Growth**: 2.3 Million -8.7 Million +8.2 Million Million** * * Through 3Q ** Through October 2014 Sources: Marcus & Millichap Research Services, BLS

5 Total Employment Growth vs. Healthcare Employment Growth 6% Total Employment Healthcare Y-O-Y Percent Change 3% 0% -3% -6% * Through October Sources: Marcus & Millichap Research Services, BLS Job Growth Since 2010 Trough* Health Care: +1,557,000 Total Employment: +10,025, *

6 U.S. Employment Gains Have Been Broad Y-O-Y Sector Change Through October 2014 U.S. Employment Sectors Absolute Change % Change Prof. & Business Services 657, % Trade, Transport & Utilities 532, % Leisure & Hospitality 380, % Health Services 348, % Construction 231, % Manufacturing 170, % Financial Activities 85, % Educational Services 80, % Government 60, % Natural Resources & Mining 47, % Other Services 43, % Information 10, % Net Change 2,643, % Sources: Marcus && Millichap Research Services, BLS BLS

7 65+ Age Cohort Growth Driving Healthcare Spending 65+ Year Old Population (Mil.) U.S. Population 65+ Years Old Total Growth *: 42.5 Million Total Growth *: 8.1 Million % * 2020* 2025* 2030* 2035* 2040* < 25 years * Forecast Sources: Marcus & Millichap Research Services, U.S. Census Bureau, BLS Average Annual Per Capita Spending $841 $2,094 $2,762 $3,411 $4,048 $4, Year Total Healthcare Expenditure Growth: $5.8 Billion $0 $1,500 $3,000 $4,500 $6,000 Average Annual Per Capita Spending

8 Number of Insured in United States Without ACA After ACA 280 Number of Insured (Mil.) % * 2015* 2016* 2017* 2018* 2019* 2020* 2021* 2022* 2023* 2024* * Forecast Sources: Marcus & Millichap Research Services, Congressional Budget Office

9 Economic & Demographic Overview

10 Changing Medical Sector Industry Consolidation

11 Medical School Enrollment 90 Number of Enrollees (000s) Sources: Marcus & Millichap Research Services, Association of American Medical Colleges

12 Demand For Physicians Exceeds Supply 1.0 Physician Supply Physician Demand Number of Physicians (Millions) : Shortage of 91,500 Physicians * 2016* 2018* 2020* 2022* 2024* Sources: Marcus & Millichap Research Services, AAMC Workforce Studies

13 Age Distribution of Office-Based Physicians 100% 9% 11% 11% 13% 14% 13% Percent of Total 75% 50% 20% 35% 24% 35% 30% 32% 29% 32% 32% 30% 28% 31% % 28% Under 35 27% 25% 23% 23% 23% 0% 8% 3% 3% 3% 3% 3% Sources: Marcus & Millichap Research Services, CDC

14 Physician Ownership of Practice Declines as Industry Consolidates 2007/ Private Practice: 61% Private Practice: 53% Percent of Total Physician Recruitment by Hospitals: 2004: 11% 2013: 64% Sources: Marcus & Millichap Research Services, American Medical Association, AMN Healthcare

15 Total Number of Hospitals Acquired 400 Total Number of Acquisitions Sources: Marcus & Millichap Research Services, Levin Associates

16 Number of Retail Clinics Growing Rapidly Total Number of Retail Clinics (000s) ,418 Usual Place of Health Care Clinic: 21% Doctor s Office: 75% 1,743 Hospital: 3% Other: 1% 2,243 2,868 Retail Clinics Will Fulfill 10.8 Million Visits in * 2015* * Forecast Sources: Marcus & Millichap Research Services, Accenture, CDC

17 Changing Medical Sector Industry Consolidation

18 Medical Office Property Performance Overview and Outlook

19 Medical Office Supply and Demand Trends Completions Vacancy 32 12% Completions (Mil. of SqFt.) % 10% 9% Average Vacancy Rate * 15* 8% * Forecast Sources: Marcus & Millichap Research Services, CoStar Group, Inc.

20 National Medical Office Rank by Metro 3Q 2014 Vacancy Rate Top 10 Metros 3Q 2014 Vacancy Y-O-Y Bps Change San Fancisco 2.2% -110 Boston 4.8% -10 San Jose 5.2% -40 Columbus 6.4% -150 Portland 6.6% -40 Seattle 6.8% -20 Milwaukee 7.0% -30 Denver 7.2% -100 Miami 7.2% -140 Minneapolis 7.3% -30 U.S. Average 9.7% -10 Bottom 10 Metros 3Q 2014 Vacancy Y-O-Y Bps Change Phoenix 19.8% -70 Las Vegas 18.5% -320 Northern NJ 16.6% -10 Detroit 16.0% 140 San Antonio 14.6% 90 Palm Beach 14.4% -20 Chicago 13.3% -150 Atlanta 12.9% -120 Dallas-Ft. Worth 12.6% 20 Cincinnati 12.3% -40 U.S. Average 9.7% -10 Sources: Marcus & Millichap Research Services, CoStar Group, Inc.

21 Medical Office Net Absorption by Vintage Demand Concentrated Among Newer Properties 6 Pre Net Absorption (Mil. of SqFt.) Q Q Q Q Q Q Q Q Q Q Q Q Sources: Marcus & Millichap Research Services, CoStar Group, Inc.

22 U.S. Medical Office Rent Growth Trends 8% Medical Office Total Office Y-O-Y Percent Change 4% 0% -4% -8% * * Through 3Q Sources: Marcus & Millichap Research Services, CoStar Group, Inc.

23 Medical Office Property Performance Overview and Outlook

24 Medical Office Investment Trends

25 U.S. Medical Office Investment Trends Transaction Activity Number of Deals % 7.7% 9.9% 8.8% 9.2% 9.1% 9.4% Percent of Total Office Transactions 9.6% 10.1% * * Trailing 12-months through 3Q Includes sales $1 million and greater Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics

26 U.S. Medical Office Buyer Composition Percent of Total Dollar Volume 100% 75% 50% 25% 9% 9% 2% 12% 34% 21% 48% 44% 14% 2% 18% 54% 7% 41% 41% Institutional Foreign Public Listed/REITs Private User/Other 0% 10% 12% 12% 11% * * YTD through October 29 Excludes entity-level transactions Includes sales $2.5 million and greater Sources: Marcus & Millichap Research Services, Real Capital Analytics

27 U.S. Medical Office Price and Cap Rate Trends $220 Average Price Cap Rates 9% Average Price per Sq. Ft. $195 $170 $145 8% 7% 6% Average Cap Rate $120 5% * Preliminary estimate through 3Q Includes sales $1 million and greater Sources: Marcus & Millichap Research Services, Real Capital Analytics, CoStar Group, Inc *

28 Medical Office Cap Rate Trends Average Cap Rates vs. 10-Year Treasury Medical Office Cap Rate 10-Year Treasury Rate 16% Average Rate 12% 8% 4% 0% 440 bps 150 bps 10-Yr Treasury Long-Term Avg bps 590 bps 300 bps * Through November 5 Includes sales $1,000,000 and greater Sources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics Cap Rate Long-Term Avg. 500 bps 610 bps 510 bps *

29 Medical Office Investment Trends

30 Questions?

31 2014 U.S. Economic and Medical Office Market Overview and Outlook November, 2014