Medical Outpatient Buildings (MOB) are well positioned to capitalize on the aging US population as the entire Baby Boomer generation reaches retirement age by 2030. Seniors are expected to increase total outpatient healthcare spending by 31% over that time to nearly $2 trillion.
The category is driven by patients seeking convenient locations for accessing healthcare services outside of traditional hospital campuses, according to CBRE’s 2025 US healthcare real estate outlook. Eighty percent of new medical outpatient buildings are being developed farther away from hospital campuses in residential and retail districts. The average size of a new MOB not adjacent to a hospital campus is 26,500 square feet.
Vacancy within the category fell this year and asking rents increased despite a robust pipeline of deliveries. Average rent is projected to rise as supply and demand remain generally balanced, said CBRE. The company expects that occupied MOB space will reach a record amount over the next year.
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In addition, MOB capital markets improved considerably and logged the first increase in annual sales transactions and the first decrease in cap rates since mid-2022. Easing inflation and additional interest rate cuts in 2025 should reduce economic uncertainty for occupiers and result in improved MOB leasing and sales transaction activity going forward, said the report.
Increasingly sophisticated technology is enabling more medical procedures to be performed in outpatient facilities, including hospital outpatient departments, surgical centers and physician offices. As technology continues to advance, more procedures likely will shift from ambulatory surgical centers and hospitals to medical outpatient facilities, the report said.
An analysis of leasing data shows that major medical providers lease space in a variety of property types, including purpose-built and state-of-the-art MOBs, traditional office buildings and former anchor-tenant spaces in shopping malls. This flexible approach to leasing is driven by a desire to make their locations more convenient for patients and to scale their capacity in a time of rapidly rising demand, according to CBRE.
CBRE forecasts that Boston, Houston and Dallas will lead for MOB absorption in 2025. Houston, which consistently has been the top market for MOB absorption since 2020, is expected to cede the top spot to Boston next year. With approximately 700,000 square feet forecast, it will be the first year since 2021 that Houston records less than one million square feet of MOB absorption.
The largest MOB projects currently under construction are either hospital-campus or campus-adjacent outpatient centers with significant government or institutional healthcare provider backing. Top markets for new construction include New York, Washington, D.C., and Dallas. In other markets, rapid population growth has spurred demand for new construction of smaller facilities in outlying suburbs. This is most evident in Dallas, Houston, Orlando, Phoenix and Atlanta, according to the report.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
