Medical Outpatient Building Rents Hit Record High As Absorption Turns Positive

Investment in medical outpatient buildings (MOBs) increased significantly in Q2, rising 32% quarter-over-quarter to reach $2.2 billion.

This brought the trailing four-quarter investment total to $9.1 billion. The average sale price for MOBs in Q2 stood at $277 per square foot—41% higher than the $196 per square foot average for traditional office properties.

MOB capitalization rates edged up by 10 basis points from the previous quarter to 7.4%, while traditional office cap rates increased by 5 basis points to 7.9%.

Phoenix led all markets in MOB investment volume over the trailing four quarters, totaling $384 million. Los Angeles followed with $365 million, and Washington, D.C. came in third at $356 million.

Average asking rents for MOBs hit a record high of $25.18 per square foot in Q2, reflecting a 0.5% increase from the previous quarter and a 0.8% rise year-over-year. The sector recorded 507,000 square feet of positive net absorption in Q2, reversing two straight quarters of negative demand.

Across the 59 markets tracked by CBRE, 2.7 million square feet of MOB space was under construction as of Q2, with Dallas, Phoenix, and Austin leading the way.