U.S. Economic and Medical Office Market Overview … Marcus & Millichap Research Services, CoStar...
Transcript of U.S. Economic and Medical Office Market Overview … Marcus & Millichap Research Services, CoStar...
-10%
-5%
0%
5%
10%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
*
GDP Health Care Expenditures
Annu
aliz
ed Q
uart
erly
Per
cent
Cha
nge
* Through 3QSources: Marcus & Millichap Research Services, BEA
U.S. GDP Growth and Health Care Spending Trends
Quarterly Employment SteadyFull Recovery of Jobs Lost in Recession
-2.7
-1.8
-0.9
0.0
0.9
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
*
Qua
rter
ly J
ob G
row
th (M
illio
ns)
* Through 3Q** Through October 2014Sources: Marcus & Millichap Research Services, BLS
+8.2 Million +10.0 Million**
-8.7 Million
Year-to-Date Job Growth**: 2.3 Million
-6%
-3%
0%
3%
6%
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
201320
14*
Total Employment Healthcare
Total Employment Growth vs. Healthcare Employment Growth
Y-O
-Y P
erce
nt C
hang
e
* Through OctoberSources: Marcus & Millichap Research Services, BLS
Job Growth Since 2010 Trough*Health Care: +1,557,000
Total Employment: +10,025,000
U.S. Employment Gains Have Been BroadY-O-Y Sector Change Through October 2014
Sources: Marcus & Millichap Research Services, BLS
U.S. Employment Sectors Absolute Change % Change
Prof. & Business Services 657,000 3.5%Trade, Transport & Utilities 532,000 2.0%Leisure & Hospitality 380,000 2.6%Health Services 348,000 1.9%Construction 231,000 3.9%Manufacturing 170,000 1.4%Financial Activities 85,000 1.1%Educational Services 80,000 2.4%Government 60,000 0.3%Natural Resources & Mining 47,000 5.3%Other Services 43,000 0.8%Information 10,000 0.4%
Net Change 2,643,000 1.9%
Sources: Marcus & Millichap Research Services, BLS
65+ Age Cohort Growth DrivingHealthcare Spending
0
25
50
75
100
1990
1995
2000
2005
201020
15*20
20*20
25*20
30*20
35*20
40*
65+
Year
Old
Pop
ulat
ion
(Mil.
)
* ForecastSources: Marcus & Millichap Research Services, U.S. Census Bureau, BLS
67%
Total Growth 2010-2040*: 42.5 Million
Total Growth 2014-2018*:8.1 Million
$841
$2,094
$2,762
$3,411
$4,048
$4,769
$0 $1,500 $3,000 $4,500 $6,000
< 25 years
25-34
35-44
45-54
55-64
65+
Average Annual Per Capita Spending
U.S. Population 65+ Years Old Average Annual Per Capita Spending
65+ 5-Year Total Healthcare Expenditure
Growth:$5.8 Billion
Number of Insured in United States
200
220
240
260
280
2014* 2015* 2016* 2017* 2018* 2019* 2020* 2021* 2022* 2023* 2024*
Without ACA After ACA
Num
ber o
f Ins
ured
(Mil.
)
* ForecastSources: Marcus & Millichap Research Services, Congressional Budget Office
67%
50
60
70
80
90
04 05 06 07 08 09 10 11 12 13
Medical School Enrollment
Sources: Marcus & Millichap Research Services, Association of American Medical Colleges
Num
ber o
f Enr
olle
es (0
00s)
0.6
0.7
0.8
0.9
1.0
2008 2010 2012 2014* 2016* 2018* 2020* 2022* 2024*
Physician Supply Physician Demand
Demand For Physicians Exceeds Supply
Num
ber o
f Phy
sici
ans
(Mill
ions
)
Sources: Marcus & Millichap Research Services, AAMC Workforce Studies
2020: Shortage of 91,500 Physicians
8% 3% 3% 3% 3% 3%
28%27% 25% 23% 23% 23%
35%35%
32% 32% 28% 31%
20%24%
30% 29%32% 30%
9% 11% 11% 13% 14% 13%
0%
25%
50%
75%
100%
2007 2008 2009 2010 2011 2012
65+
55-64
45-54
35-44
Under 35
Age Distribution of Office-Based Physicians
Perc
ent o
f Tot
al
Sources: Marcus & Millichap Research Services, CDC
Sources: Marcus & Millichap Research Services, American Medical Association, AMN Healthcare
Physician Ownership of Practice Declines as Industry Consolidates
Private Practice: 61% Private
Practice: 53%
2007/2008 2012
Percent of Total Physician Recruitment by Hospitals:
2004: 11%2013: 64%
0
100
200
300
400
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Total Number of Hospitals Acquired
Sources: Marcus & Millichap Research Services, Levin Associates
Tota
l Num
ber o
f Acq
uisi
tions
1.0
1.5
2.0
2.5
3.0
2012
2013
2014
*20
15*
Tota
l Num
ber o
f Ret
ail C
linic
s (0
00s)
* ForecastSources: Marcus & Millichap Research Services, Accenture, CDC
1,418
Number of Retail Clinics Growing Rapidly
1,743
2,243
2,868
Retail Clinics Will Fulfill 10.8 Million Visits in 2015
Usual Place of Health Care
Doctor’s Office: 75%
Clinic: 21%Hospital: 3%
Other: 1%
0
8
16
24
32
08 09 10 11 12 13 14* 15*8%
9%
10%
11%
12%Completions Vacancy
Com
plet
ions
(Mil.
of S
qFt.) Average Vacancy R
ate
Medical Office Supply and Demand Trends
* ForecastSources: Marcus & Millichap Research Services, CoStar Group, Inc.
National Medical Office Rank by Metro3Q 2014 Vacancy Rate
Top 10Metros
3Q 2014Vacancy
Y-O-Y BpsChange
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 10Metros
3Q 2014Vacancy
Y-O-Y BpsChange
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.
-2
0
2
4
6
2009
1Q
2009
3Q
2010
1Q
2010
3Q
2011
1Q
2011
3Q
2012
1Q
2012
3Q
2013
1Q
2013
3Q
2014
1Q
2014
3Q
Pre-2009 2009+
Sources: Marcus & Millichap Research Services, CoStar Group, Inc.
Medical Office Net Absorption by VintageDemand Concentrated Among Newer Properties
Net
Abs
orpt
ion
(Mil.
of S
qFt.)
U.S. Medical Office Rent Growth Trends
-8%
-4%
0%
4%
8%
2008
2009
2010
2011
2012
2013
2014
*
Medical Office Total Office
* Through 3Q Sources: Marcus & Millichap Research Services, CoStar Group, Inc.
Y-O
-Y P
erce
nt C
hang
e
0
200
400
600
800
06 07 08 09 10 11 12 13 14*
U.S. Medical Office Investment TrendsTransaction Activity
* Trailing 12-months through 3QIncludes sales $1 million and greaterSources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics
Num
ber o
f Dea
ls
6.9%
7.7%9.9%
8.8%
9.2%9.1%
9.4%
9.6%10.1%
Percent of TotalOffice Transactions
10% 12% 12% 11%
48% 44%54%
41%
21%34%
18% 41%
12%2%
2%
9% 9%14%
7%
0%
25%
50%
75%
100%
2011 2012 2013 2014*
Institutional
Foreign
Public Listed/REITs
Private
User/Other
U.S. Medical Office Buyer Composition
Perc
ent o
f Tot
al D
olla
r Vol
ume
* YTD through October 29Excludes entity-level transactionsIncludes sales $2.5 million and greaterSources: Marcus & Millichap Research Services, Real Capital Analytics
$120
$145
$170
$195
$220
2007
2008
2009
2010
2011
2012
2013
2014
*
5%
6%
7%
8%
9%Average Price Cap Rates
* Preliminary estimate through 3QIncludes sales $1 million and greaterSources: Marcus & Millichap Research Services, Real Capital Analytics, CoStar Group, Inc.
U.S. Medical OfficePrice and Cap Rate Trends
Aver
age
Pric
e pe
r Sq.
Ft.
Average Cap R
ate
0%
4%
8%
12%
16%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
201320
14*
Medical Office Cap Rate 10-Year Treasury Rate
Medical Office Cap Rate Trends Average Cap Rates vs. 10-Year Treasury
* Through November 5Includes sales $1,000,000 and greaterSources: Marcus & Millichap Research Services, CoStar Group, Inc., Real Capital Analytics
Aver
age
Rat
e
10-Yr Treasury Long-Term Avg.
150 bps 560 bps
590 bps
500 bps 510 bps300 bps
440 bps
610 bps
Cap Rate Long-Term Avg.