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22 DECEMBER 2021
A HEALTHY APPROACH
Atkins sells long-held medical office buildings, capitalizing on demand while seeking new opportunities
Commercial real estate’s medical office sector has never been healthier.
Increased demand for health care, enthusiastic investor interest in the segment and the lack of supply have made it one of the most attractive asset classes in 2021. And buyers’ recent rotation out of hotels and retail — as a result of the pandemic — has put even more focus on spaces that house doctors, hospital networks and other tenants providing vital services.
It has provided a new opportunity and new considerations for West Orange-based Atkins Cos., which has owned and developed medical office space since the 1970s. Charles “Chick” Atkins, a principal with the
family-owned firm, said he’s not seen capitalization rates for medical office properties this low in 40 years — roughly 5 percent on average and as low as 4 percent for higher-end assets — in an indication of rising values.
In early November, Atkins Cos. sold a six-building,
“We generally like to hold, but in
this case, we took advantage of an overheated market,” Atkins said. “We want to continue to invest in this sector, in New Jersey, or elsewhere in the Mid-Atlantic region, but we’re being more opportunistic now. We’re wanting to buy properties where we know we can add value.
“At this moment, we’re being very careful, given the valuations.”
Atkins said there had been “a slow ascent” in interest in medical office buildings, and that pace picked up in the past two years. In 2021, he said, the pricing on “really high-quality properties has been excellent.”
He added that the pandemic “showed us that medical office buildings
really are a recession-resistant real estate segment.” While retail and hospitality properties suffered from move-outs and shutdowns in the past year, he said, “there weren’t any doctors closing their offices. Health care is in much demand, and it always will be.”
Atkins said the recent dominance of bigger players such as RWJBarnabas Health, Atlantic Health System and Hackensack Meridian Health — as well as large private groups like Summit Health — has helped interest and value grow in New Jersey’s medical office buildings.
“Years ago, medical offices were mostly smaller offices with a few doctors,” Atkins said. “Those are
Charles “Chick” Atkins
250,000-square- foot medical office portfolio in four states,
as it turns its focus to new acquisitions after its longtime ownership of
the properties. Its portfolio currently comprises seven properties.
By Paul Bergeron
West Orange-based Atkins Cos. has sold some of its long-held medical office buildings in the region, capitalizing on surging investor demand for the asset class as it looks for more opportunistic ways to expand its portfolio.