Medical Outpatient Buildings Post Top Risk-Adjusted Returns, Low Volatility In New Study

Medical outpatient buildings (MOBs) have emerged as one of institutional real estate’s most dependable asset classes, consistently delivering strong performance across market cycles, according to a new white paper from the Revista Rising Leaders Council.

Analyzing 10 years of NCREIF Property Index data alongside vacancy and net operating income growth figures from CBRE and Green Street, the report assessed performance across four metrics: total returns and volatility, risk-adjusted efficiency, downside protection and operating stability. Across all measures, MOBs ranked at or near the top among core property types, including industrial, office, retail and apartments.

The study found that MOBs pair competitive returns with notably low volatility, generating average annual returns of approximately 6.6% with volatility of just 4.2%. While industrial properties posted the highest absolute returns at roughly 12.4%, they also exhibited nearly three times the volatility at 12.7%. Apartments and retail produced more moderate returns of about 4% to 6% with volatility between 5% and 7%, while office lagged with returns near 2% and volatility exceeding 8%.

MOBs also led on a risk-adjusted basis, posting the highest Sharpe ratio at 0.95, a measure of return per unit of risk. Industrial followed at 0.77, apartments at 0.45, retail at 0.27, and office trailed at -0.04.

“The results underscore MOBs’ ability to deliver excess returns while assuming less risk, an advantage for investors prioritizing consistency,” the report said.

Downside protection further differentiated the sector. Peak-to-trough appreciation declines for MOBs were limited to roughly 13%, comparable to industrial and well below retail at 24%, apartments at 18% and office at approximately 37%. Even when excluding income returns, MOBs remained among the least volatile property types, highlighting their resilience during market downturns.

That stability is supported by predictable cash flow and occupancy. MOBs posted the highest income return-to-volatility ratio at 15.8, far outpacing industrial at 6.2, office at 7.8, apartments at 10.4 and retail at 9.4. Vacancy rates have consistently remained between 9% and 13% for more than a decade, with minimal quarter-to-quarter fluctuation.

“By comparison, industrial, retail and office sectors experienced roughly double the vacancy volatility, while apartments, though stable, delivered lower income return efficiency,” the report said.

Source: GlobeSt