Low-Profile MOBs Lead In Risk-Adjusted Returns

Medical outpatient buildings (MOBs) tend to attract less attention than the four primary commercial real estate sectors, but they may actually outperform them on a risk-adjusted basis.

That’s the main takeaway from a recent analysis of MOB performance.

According to Sophie Kim, Vice President of Investments at Rethink Healthcare Real Estate, “MOBs deliver the highest return per unit of risk and exhibit shallow peak-to-trough drawdown,” as noted in her white paper The Quiet Achiever: MOBs Deliver Superior Risk-Adjusted Returns for Revista’s Rising Leaders Council.

Rethink based its findings on data from the NCREIF Property Index (NPI), comparing returns, volatility, and drawdowns across major property types. It also incorporated vacancy data from CBRE and net operating income (NOI) growth figures from Green Street to better understand the fundamentals supporting MOB stability.

From Q3 2014 through Q3 2025, MOBs generated an average annual return of about 6.6% with volatility of 4.2%—well below that of traditional core sectors. Industrial properties posted higher returns, around 12.4%, but with much greater volatility at 12.7%, roughly triple that of MOBs.

Kim describes this as two distinct performance paths: industrial real estate benefits from periods of rapid growth but experiences sharper downturns, while MOBs deliver steady, compounding returns over time.

Using the Sharpe ratio to evaluate excess return per unit of risk, MOBs outperform all core sectors. They also produce the highest income return (15.8), exceeding industrial (6.2), apartments (10.4), retail (9.4), and office (7.8). In addition, MOBs rank ahead of apartments, retail, and office in appreciation return relative to volatility.

In terms of downside protection, MOBs and industrial properties perform similarly. When isolating appreciation returns, MOBs saw a peak-to-trough decline of about 13%, close to industrial and far less severe than retail (37%), office (24%), and apartments (18%). Even without income cushioning, MOBs remain among the least volatile real estate sectors.

Public market data from 2010 to 2024 reinforces this pattern. Green Street’s analysis shows MOBs had the lowest volatility in same-store NOI growth, at roughly 0.6% annually.

Occupancy trends also highlight their stability. MOB vacancy rates have a standard deviation of 1.3 percentage points—second only to apartments—while quarterly vacancy changes are the most stable of any property type at just 0.16 percentage points. This consistency is driven by long-term leases, essential healthcare use, and disciplined development.

Overall, MOBs stand out as “quiet achievers” in institutional real estate. They may not attract as much attention, but they consistently deliver reliable, efficient returns.

“Long-term investment success depends not just on returns, but on the stability of those returns—and that’s where MOBs excel,” Kim emphasized.

Source: connectcre