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MOB Sector Expands Due to Outpatient Care Shift
According to JLL’s recently released “2025 Medical Outpatient Building Perspective,” five themes will impact growth in the medical office building (MOB) sector. Key findings include the following:
Outpatient Shift
Health systems and corporate medical groups are focused on outpatient settings to complement their inpatient strategies. As such, “finding the right location to serve patients and grow market share is top priority,” the report said.
Rising Demand and Limited Construction
Health systems, corporate medical groups and independent providers have driven the demand for MOBs. However, supply is limited due to higher construction expenses, increased borrowing costs and volatile capital markets.
Noted the report: “With limited availability and limited new spaces on the horizon, healthcare tenants, especially those of low to mid-acuity, are increasingly considering office and retail space that is near their target patient population or near a hospital campus.”
Growing NOI
While rent growth experienced a year-over-year decline in 2024, “rates at the top end of the MOB market have grown faster than mid- and low-tier rents,” the report said. Many tenants are renewing in place; JLL said that lease terms average 107 months for new leases, meaning “investors have steady increases locked in.” Meanwhile, increasing tenant cost pressures could mean that “same-store MOB rent growth will continue to be steady,” according to the report.
Investor Stability
The report indicated that MOB tenant stability and the higher likelihood of renewal mean that MOBs “remain an attractive asset class for investors.” Health systems and providers own nearly 50% of the 1.4 billion square feet of medical outpatient buildings.
Additionally, “in 2025, investors will increasingly consider opportunities to re-tenant existing office with medical uses to add value.”
The Forecast
The report indicated that in 2025 and beyond:
- An aging population, increased disease prevalence and the need for services near a growing population are some demand drivers.
- Conversely, headwinds include shifts to home care and telehealth, workforce shortages and slowing population growth.
- Political administration changes and policy uncertainty will also “shake up the sector.”
- ◦Lease
- ◦People
- ◦Economy
