With average asking rents continuing to rise—albeit at a slower pace, from 3.7% growth in 2023 to 2.5% in 2024—medical outpatient buildings are emerging as a lucrative asset class in an otherwise challenging market.
The financial appeal of MOBs stems from their resilience and ability to outperform other office categories, according to a JLL report. Premium properties are leading the way, with rents in the 90th percentile of Revista’s top 100 markets achieving a compound annual growth rate (CAGR) of 2.4% between 2019 and 2024, compared to a 1.8% CAGR for mid-tier properties. Escalation clauses are also boosting returns, with average lease escalators hitting 3% in 2024, surpassing rent growth and creating additional value for landlords.
Tenant retention is another key driver of MOB success. Healthcare providers, who typically operate on longer lease terms, are renewing at high rates—over 80%, according to Green Street data from Q3 2024. Vacancy rates remain strikingly low, with availability at just 6.9% in Q4 2024, underscoring the sector’s stability. New leases averaged a commitment of nearly nine years (107 months), further cementing the long-term reliability of MOB tenants.
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Demand for outpatient care is surging, fueled by an aging population and rising disease prevalence. Outpatient volumes are expected to grow by 10.6% over the next five years, far outpacing inpatient growth of just 0.9%. This shift is placing increasing pressure on developers to meet demand, but high construction and financing costs are constraining new supply. As a result, newer properties command higher rents, widening the gap between top-tier and older facilities.
Sunbelt markets are leading the charge in MOB rent growth due to demographic expansion and localized healthcare needs. Among the top-performing regions, Northern New Jersey saw rents climb by an impressive 11%, while Portland experienced more modest growth at around 2.5%. Nearly all top markets have vacancy rates below 10%, making it difficult for tenants to find alternative options and further driving demand for premium spaces.
Despite these strengths, healthcare tenants face financial challenges that could temper future rent increases. Operating margins remain thin, estimated at just 4.9% by Kaufman Hall in December 2024—and Medicare reimbursement rates fell by 2.83% from 2024 to 2025, putting additional pressure on revenue streams. These factors suggest that while MOB rent growth will remain steady, outsized jumps are unlikely.
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