Medical Office Investments Surge 122% In Q4 2025

Investor demand for medical outpatient buildings surged in late 2025, positioning the sector among the year’s top-performing asset classes.

According to CBRE, fourth-quarter investment volume jumped 122% from the prior quarter to $6.1 billion. A major contributor was the $2 billion sale of three tranches from Welltower’s 18 million-square-foot portfolio to Remedy Medical Properties.

For the full year, medical office investment totaled $12.6 billion—up 35% from 2024 and the strongest annual performance since 2022. Fourth-quarter activity alone was 79% higher than the five-year Q4 average of $3.4 billion.

Pricing gains were more measured. The average sale price for medical office properties rose $2 per square foot quarter-over-quarter, a 0.7% increase to $300 per square foot. By contrast, traditional office values declined 2.5% to $192 per square foot. Despite the recent uptick, medical office pricing remains below its Q3 2022 high of $374 per square foot.

Cap rates ticked higher as well. CBRE reported that the average medical office cap rate increased nine basis points from the prior quarter and seven basis points year-over-year to 7.1%. Traditional office cap rates averaged 7.8%, rising 28 basis points from a year earlier but holding steady compared to the previous quarter.

Regionally, the Southeast led fourth-quarter medical office investment with $1.62 billion in volume. The Southwest followed at $1.16 billion, with the West close behind at $1.11 billion. The Midwest recorded $1.05 billion, while the Mid-Atlantic and Northeast trailed at $609 million and $532.6 million, respectively.

By transaction volume measured in square footage, the Midwest narrowly surpassed the Southeast, totaling 4.3 million square feet compared to 4.2 million square feet in the Southeast and 3.4 million square feet in the Southwest. Sale prices per square foot were highest in the Southeast at $389, followed by the West at $346 and the Southwest at $343. The Northeast averaged $331 per square foot, the Mid-Atlantic $284 and the Midwest $245.

Among the top 20 U.S. markets, Washington, D.C. recorded the highest investment volume over the four quarters ending in Q4 2025 at $536 million. South Florida followed with $511.6 million, ahead of Phoenix at $467.6 million and Chicago at $365.7 million. Dallas, Richmond, Los Angeles and Las Vegas also each surpassed $300 million in volume.

The report also highlighted shifts in capital sources. Alternative lenders accounted for 40% of loan volume in Q4 2025, up from 23% a year earlier. Banks’ share fell to 35% from 43%, while life insurance companies declined to 19% from 33%. CMBS lenders, though still representing a small portion of the market, increased their share to 7%, up from 1% the prior year.

Source: GlobeSt