The Quiet Achiever: MOBs Deliver Superior Risk-Adjusted Returns (Rethink Education)

Summary

• Medical Outpatient Buildings' annualized total return averaged approximately 6.6 percent with annual volatility of 4.2 percent, the lowest among core sectors.p.3
• Industrial delivered roughly 12.4 percent return but with about 12.7 percent volatility.p.3
• MOBs recorded the highest Sharpe ratio at nearly 0.95, against roughly 0.77 for Industrial, 0.45 for Apartments, 0.27 for Retail and -0.04 for Office.p.4
• MOBs record the highest total return-to-volatility ratio at 1.6 and an income return-to-volatility ratio of 15.8, against 6.2 for Industrial and 7.8 for Office.p.5
• Green Street data show MOB same-store NOI growth volatility of approximately 0.6 percent annually.p.5
• MOB vacancy has remained within a narrow range of 9 to 13 percent, with a standard deviation of 1.3 percentage points versus 2.8 for Industrial.p.6
• The standard deviation of quarterly vacancy changes for MOBs is only 0.16 percentage points, the lowest among all sectors.p.6

Key insights

1. MOBs combine strong returns with the lowest volatility among core property sectors.p.3
2. Industrial volatility of about 12.7 percent is nearly three times that of MOBs.p.3
3. MOBs show the highest Sharpe ratio, at nearly 0.95.p.4
4. Office lagged with a Sharpe ratio of -0.04.p.4
5. The income return-to-volatility ratio for MOBs is 15.8, exceeding Apartments at 10.4 and Retail at 9.4.p.5
6. In appreciation return-to-volatility, Industrial ranks first near 0.6, with MOBs following at 0.3.p.5
7. MOB vacancy standard deviation is 1.3 percentage points, while Apartments display the lowest at 0.8.p.6