Long-Term Demand Keeps Medical Office On Solid Ground

Medical office real estate continues to demonstrate remarkable stability despite broader economic uncertainty, according to industry leaders at this year’s GlobeSt.com Healthcare conference.

Panelists stressed that sector fundamentals remain strong, demand is deeply rooted, and healthcare systems are increasingly committed to long-term occupancy strategies.

Moderator John Chang, SVP of Marcus & Millichap, led a conversation with experts from CBRE, MedProperties Realty Advisors, First Citizens Bank, Newmark, and Capital One.

“The fundamentals remain strong,” said Darryl Freling of MedProperties, noting consistently high occupancy across medical office properties, supported by powerful demographic trends and the essential nature of outpatient services. Even as tenants grapple with pressures such as reduced Affordable Care Act subsidies and rising operating costs, Freling emphasized these forces often reinforce tenant retention: “If they’re under operational cost pressure, you have high confidence they will renew.”

CBRE vice chair Chris Bodnar echoed this view, describing medical office as “the steady Eddy of commercial real estate,” reliably posting annual rent growth even while other sectors soften.

From the tenant perspective, Kyle Arnold of Newmark characterized today’s climate as a “stay-put environment.” This isn’t due to lack of expansion appetite, he explained, but rather the increasing costs of construction and operations.

Steven Reedy of First Citizens Bank added that elevated replacement costs are pushing tenants toward renewals and longer lease terms.

The collective outlook: medical office is poised to outperform through 2025, buoyed by durable user demand, consistent rent growth, and healthcare systems more focused than ever on long-term real estate strategy.

Source: GlobeSt