Medical Office Investors Step Up Activity As Capital Markets Improve

U.S. medical office building investment activity accelerated during the first half of 2026, with investors directing more capital toward healthcare real estate as lending conditions improved and operating fundamentals remained strong. According to Cushman & Wakefield’s 2026 Mid-Year MOB Capital Markets Update, medical office investment volume totaled $6.7 billion through the first six months of the year, a 21% increase from the same period in 2025. At the same time, larger transactions, improving property values and greater lender participation signaled growing confidence in the sector.

Larger Deals Drive Investment Volume

Although the number of medical office transactions declined 15% year over year, average deal size increased to approximately $20 million. Portfolio activity was particularly strong, with portfolio sales more than doubling from a year earlier. Single-asset sales also increased 42%, reaching $3.4 billion during the first half of 2026.

The shift toward larger transactions suggests investors are placing greater emphasis on institutional-quality medical office assets and portfolios that can provide durable income at scale.

Pricing also strengthened. Medical office cap rates compressed by 35 basis points year over year to approximately 6.8%, although pricing remains above longer-term historical averages.

Medical Office Fundamentals Continue to Support Demand

Investor interest continues to be supported by high occupancy, limited new construction and steady rent growth. Medical office rents increased approximately 2% from a year earlier, while development remains constrained by elevated construction costs and capital requirements.

Broader healthcare trends are reinforcing those fundamentals. Demand for outpatient facilities continues to benefit from an aging U.S. population, rising healthcare utilization and the migration of procedures and services away from traditional hospital campuses and into community-based outpatient locations.

Those dynamics have helped distinguish medical office from several traditional commercial real estate categories. Limited new supply combined with healthcare-related tenant demand can provide greater visibility into occupancy and cash flow, factors that become particularly important when investors are underwriting properties in a higher-cost capital environment.

Lending Activity Rises Sharply

The debt market for medical office properties also improved significantly during the first half of the year.

Loan origination volume increased 88% year over year as lenders responded to stronger transaction activity and renewed demand for healthcare real estate investments. Banks remain the sector’s dominant financing source, accounting for nearly three-quarters of medical office loan originations over the past five years.

Fixed-rate borrowing costs have also moved approximately 80 basis points below their 2023 peak. At the same time, lenders have shown greater willingness to accept fixed-rate exposure and higher loan-to-value ratios, creating additional financing options for qualified acquisitions.

Income Remains Central to the Medical Office Investment Case

Income performance continues to play a major role in attracting capital to medical office properties. Income returns have remained above 5.5% for seven consecutive quarters, while property appreciation has returned to positive territory.

One-year total returns reached approximately 6% during the second quarter of 2026, the sector’s strongest performance since 2022.

That combination helps explain why investors continue to favor medical office assets even as uncertainty surrounding inflation, interest rates and the broader economy remains. Rather than relying primarily on aggressive appreciation assumptions, buyers can underwrite properties around existing income, occupancy and healthcare demand.

Outlook Remains Positive but Selective

Medical office investment activity could remain elevated through the remainder of 2026 as additional capital moves into the sector and lenders continue competing for quality transactions.

Challenges remain, particularly from construction costs, inflation and uncertainty over future interest-rate movements. However, limited new supply could also reinforce the value of well-located existing medical office properties, especially in markets where outpatient demand continues to expand.

For healthcare real estate investors, the improving capital markets environment combined with resilient occupancy and income performance could keep medical office buildings among the more closely watched commercial real estate asset classes heading into 2027.

Key Facts

Sector: Medical Office / Medical Outpatient Buildings
Market: United States
Reporting Period: First Half 2026
Investment Volume: $6.7 billion
Year-Over-Year Change: Up 21%
Average Deal Size: Approximately $20 million
Single-Asset Sales: $3.4 billion, up 42% year over year
Cap Rate: Approximately 6.8%, down 35 basis points year over year
Rent Growth: Approximately 2% year over year
Loan Origination Growth: Up 88% year over year
One-Year Total Return: Approximately 6% in Q2 2026
Source Research: Cushman & Wakefield MOB Capital Markets 2026 Mid-Year Update

Source: ConnectCRE