Cap Rate

The capitalization rate is one of the most widely used metrics in commercial real estate valuation. It is calculated by dividing a property's Net Operating Income (NOI) by its current market value or purchase price. For example, a property generating $200,000 NOI purchased for $2,500,000 has a cap rate of 8%. Medical office buildings in the Chicago suburban market typically trade at cap rates between 5.5% and 7.5%, depending on building class, tenant creditworthiness, lease term remaining, and location. Lower cap rates indicate higher property values and are typical of Class A MOBs with long-term, creditworthy healthcare tenants. Understanding cap rates helps healthcare operators who are considering purchasing their own space evaluate whether buying vs. leasing makes financial sense.

Healthcare providers considering property ownership need to understand how cap rates affect both acquisition pricing and future resale value. A well-leased MOB in a strong suburban Chicago market can be a significant asset for a practice's long-term financial health.

A 10,000 sq ft MOB in Naperville generates $350,000 in annual NOI. At a 6% cap rate, the building's estimated market value is approximately $5.8 million ($350,000 / 0.06).