Bigger is better: Massive portfolio sales spurring medical office market

May 3, 2018 | Dan Rafter

​Large portfolios worth more than $150 million gave the medical office market a boost in 2017. JLL reported that these major portfolios made up an impressive 60 percent of the medical office sales recorded throughout the country last year.
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Overall, the $5.9 billion worth of portfolio sales in the medical office sector last year exceeded the total sales for all years before 2015, according to JLL’s research.

JLL cited the sale of Duke Realty’s healthcare division at $2.7 billion as the biggest medical office sale of 2017. This deal boasted record-breaking pricing levels for medical office, encouraging other owners of medical portfolios to hit the market, too.

The Duke sale along with the MBRE Healthcare recapitalization of $640 million, the Meadows & Ohly sale of $600 million and the Investors Real Estate Trust healthcare division sale of $368 million dominated transaction activity for the year. JLL reported that these big sales made up 41 percent of 2017’s medical office sales.

Overall, there were 19 portfolio sales in the medical office space during 2017. These sales had an average value of $312 million. Compare this to 2014 through 2016, when the sector saw an average of 12 portfolio sales each year with an average sales price of $214 million.
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The trend of large portfolio sales grabbing headlines has continued into 2018. The PHT portfolio and Welltower’s sale of its Aurora Health Care medical systems each consisted of 1.4 million square feet. Two other big medical office portfolios are now on the market: the 950,000-square-foot Hammes portfolio and the 1.02 million-square-foot Elliott Bay healthcare portfolio.

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