📢 Medical office properties have emerged as one of the strongest CRE subsectors in 2025. Q2 saw record rents, renewed net absorption, and surging investment volume. Unlike traditional offices, MOBs remain highly liquid, supported by tenant stickiness and healthcare-driven demand.
Average MOB rent: $25.18/SF (Q2 2025) — record high
Net absorption: +507k SF (Q2), reversing two quarters of losses
Vacancy: 9.9% (Q2), tightening below 10%
MOB investment sales: $2.2B in Q2 (+32% QoQ); trailing 4Q = $9.1B
Avg. sale price: $277/SF vs office $196/SF (41% premium)
MOB cap rate: 7.4% vs office 7.9%
Top metros: Phoenix $384M, LA $365M, D.C. $356M
Pipeline: 2.7M SF under construction (Dallas, Phoenix, Austin lead)
Loan Performance
MOBs show sector-low vacancy and long lease terms, reducing default risk compared with general office. Average MOB cap rates (7.4%) still price ~300 bps above Treasuries, preserving lender cushions. Debt underwriting remains cautious (55–65% LTV, 6–7% interest) but stabilized MOBs with strong sponsors clear financing hurdles.
Demand Dynamics
Healthcare-driven tenants resumed space take-up, pushing absorption positive after two weak quarters. Vacancy below 10% signals resilience versus general office (high teens to 20s). Aging demographics and a backlog of elective procedures continue to support outpatient demand, with absorption expected to stay mildly positive into year-end.
Asset Strategies
Investors favor creditworthy tenants (hospital systems, diagnostic centers) and assets with essential-service anchors. Premium pricing ($277/SF) reflects tenant durability. New supply remains measured (2.7M SF underway), often build-to-suit, limiting overhang risk. Operators enhancing amenities (pharmacies, flexible suites, telehealth-enabled spaces) strengthen retention and justify rent escalations.
Capital Markets
Capital rotation is pronounced: $2.2B Q2 MOB sales contrast with depressed volumes elsewhere. Institutional and private capital alike are reallocating into healthcare real estate funds. REIT fundraising for MOBs improved mid-2025, signaling sector stability. Cap rates stabilized mid-7s; interest rate relief could compress yields, but underwriting stress-tests assume flat to slightly higher caps
MOBs command 41% pricing premium to traditional office.
Vacancy <10% highlights stability vs. 20%+ in generic office.
$2.2B in quarterly investment shows liquidity concentrated in healthcare.
New construction is cautious and targeted, limiting oversupply.
🛠 Operator’s Lens
Lock tenants into long-term renewals at today’s peak rents.
Push escalations toward upper range (2–3%) while vacancy is low.
Budget higher TI for medical build-outs (labs, imaging).
Invest in retention amenities (parking, pharmacies, flexible exam space) to secure stability.
Medical office rents should rise steadily at 0.5–1% per quarter, modest but durable given reimbursement limits. Cap rates likely plateau mid-7%, with possible compression if the Fed eases.
Transaction volume should hold near 2024 levels, with Phoenix, LA, D.C., Houston, and Boston absorbing the bulk of capital. Vacancy could fall toward 9.5% by year-end before new deliveries arrive in 2026. Over the next decade, demographics and outpatient migration keep MOBs a core safe-haven asset class, with superior pricing power and liquidity compared to broader office.
CBRE Research (Aug 2025); Wolf Media USA
Chart 1 – Top MOB Investment Markets (Trailing 4 Quarters, Q2 2025)
Chart 2 – MOB vs Traditional Office: Sale Price & Cap Rate (Q2 2025)
