Medical office buildings (MOBs) are showing resilience and renewed momentum. In Q2 2025, asking rents hit a record high, absorption flipped back to positive after two quarters of losses, and capital investment surged 32% quarter-over-quarter. Investors are reaffirming MOBs as a defensive, income-driven asset class distinct from traditional office.
📌 Key Highlights
Q2 2025 investment volume: $2.2B (+32% QoQ). Trailing 4Q total = $9.1B.
Average pricing: $277/SF vs. $196/SF for traditional office.
Cap rates: 7.4% (+10 bps QoQ); traditional office at 7.9%.
Asking rents: Record $25.18/SF (+0.5% QoQ; +0.8% YoY).
Net absorption: +507k SF (after two negative quarters).
Under construction: 2.7M SF in 59 markets; Dallas, Phoenix, Austin lead pipelines.
Top T4Q investment markets: Phoenix ($384M), Los Angeles ($365M), Washington, DC ($356M).
1. Pricing & Rent Dynamics
At $25.18/SF, MOB asking rents reached an all-time high. Growth is modest (under 1% YoY), but the trajectory contrasts sharply with volatility in general office. The rent premium reflects tenants’ stickiness — outpatient providers rely on location, patient access, and co-location with hospital systems.
2. Liquidity & Investment Flow
Q2’s $2.2B transaction volume (+32% QoQ) shows capital is actively targeting MOBs again. With $9.1B traded in the past 12 months, the segment sits comfortably above long-term averages. Pricing at $277/SF demonstrates a material premium over traditional office, reflecting investors’ willingness to pay up for stability and healthcare-anchored demand.
3. Demand & Absorption
Net absorption of +507k SF in Q2 reverses two prior quarters of net negative demand. This inflection confirms that tenant demand is stabilizing. Drivers include expansion of health systems, aging demographics, and ongoing decentralization of care to outpatient sites. The development pipeline (2.7M SF) is notable but not excessive relative to national demand — though Sun Belt markets bear watching for near-term supply risks.
4. Risk & Execution
The modest 10 bps cap-rate rise to 7.4% reflects broader capital market pressures rather than sector weakness. MOB spreads versus traditional office cap rates are holding steady. The risks remain micro: lease rollovers, TI/LC costs, and tenant credit (particularly for smaller operators or independent practices). Investors must distinguish between trophy, hospital-anchored MOBs and commodity suburban product.
If I’m allocating capital, I’m underwriting MOBs on tenant credit, lease duration, and location adjacency to major hospital systems. At $277/SF pricing, the premium is justified only when the tenancy is stable and TI exposure is manageable. Commodity suburban MOBs without health-system linkage should clear at discounts.
📈 Read-Through
MOBs outperform general office in both rents and pricing — the market is paying for sticky demand.
Capital is rotating back in — $2.2B in Q2 proves liquidity is there for the right assets.
Operational stability matters more than macro growth — tenant mix and TI economics decide returns.
Pipeline caution — Dallas, Phoenix, Austin are building the most; watch absorption versus deliveries.
H2 2025 leasing: Track whether positive absorption holds into year-end.
Cap-rate spreads: MOB vs. traditional office spread (~50 bps) is thin — stability must support it.
Capital depth: Will private equity and healthcare REITs increase activity if rates ease?
Development watch: Sun Belt pipelines may pressure short-term vacancy; coastal supply remains limited.
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