CBRE IM fund invests in Orange County medical office portfolio

CBRE IM fund invests in Orange County medical office portfolio
Image: Courtesy of CBRE Investment Management

CBRE Investment Management, on behalf of a fund it manages, has invested in a four-building medical office portfolio totaling 282,683 square feet in the coastal gateway market of Orange County, California, through a joint venture with Healthcare Realty Trust.

The assets were part of the Healthcare Trust of America portfolio, which has merged with Healthcare Realty Trust to form the largest medical office building owner in the United States.

Located on the campus of a leading acute care hospital in affluent Mission Viejo, the portfolio includes Mission Medical Center Buildings 1-3 and Mission Medical Center Tower.

These buildings, which recently underwent major renovations, feature ample surface parking, on-site pharmacies, recently renovated lobbies, new gurney-sized elevators, upgraded landscaping, and sustainability elements including new HVAC roof systems, LED lights and recycled water landscaping.

Recession-resistant sector

The firm aims to further increase its investment nationally in the sector it expects to be recession-resistant.

Medical office is a new strategy for our fund,” said Larissa Belova, Portfolio Manager, CBRE Investment Management. “Similar to the life science sector, the medical office sector is attractive because the aging population coupled with the world pandemic have increased spending on healthcare. Our strategy focuses on assets located within or adjacent to thriving hospital systems that create ecosystems that benefit doctors and their patients.”

Medical office has high barriers to entry due to the increasing complexity of the assets, resulting in an undersupply of state-of-the-art assets,” said Sondra Wenger, Head of Americas Commercial Operator Division, CBRE Investment Management. “Tenant retention rates tend to be higher because of the cost of tenant improvements and the need for a recognized location. This acquisition gave us an opportunity to gain immediate scale of historically strong-performing medical office building assets in a top cluster within the healthcare sector, and we are looking to increase our investment nationally in this sector that has performed well through market cycles.”

According to CBRE IM, medical office properties have proven relatively resilient with vacancies averaging about 2% lower than traditional offices as the work of medical practitioners often requires an in-office presence.

”For these reasons, medical office assets are expected to outperform the office market overall,” the company said.