New Data Identifies The Next Wave Of Medical Office Winners

Medical office has quietly become one of the tightest segments in U.S. commercial real estate, and new data from Cresa provided exclusively to GlobeSt.com shows a select group of metros beginning to pull away from the broader market on rents, absorption and development activity.

For investors, the emerging picture is increasingly localized. National averages only tell part of the story as market-specific dynamics now play a larger role in determining pricing power, occupancy stability and construction risk.

Pricing Power Concentrates In Select Markets

Across the U.S., medical office rent growth has moderated after several years of strong gains. Average asking rents increased less than 1% over the past 12 months, even as operating expenses continued to rise. Still, several metros continue to command significant pricing premiums.

San Francisco leads the country with Q1 2026 asking rents of $51.04 per square foot, followed by Miami at $49.30 and San Jose at $46.94. Los Angeles and New York City round out the top five at $44.65 and $42.34 per square foot, respectively.

San Diego, Seattle, Austin, Charlotte and Charleston also remain in the top tier, with rents generally ranging from the mid-$30s to high-$30s per square foot.

These markets continue to benefit from strong demographics, institutional healthcare presence and highly constrained locations that allow landlords to maintain pricing despite rising occupancy costs. Rent growth, however, tells a different story.

Orlando posted the strongest annual increase in the country at 5.32%, far exceeding the national medical office average of 0.78%.

Dallas and Charleston followed at 2.35% and 2.24%, while Tampa and Denver recorded gains of 2.03% and 1.69%, respectively. Las Vegas, Miami, Austin, Los Angeles and San Francisco also posted rent growth between 1% and 1.54%.

The overlap between high-rent and high-growth markets remains limited, with Miami and San Francisco among the few appearing on both lists. More broadly, the data highlights a split market: coastal metros continue to command the highest face rents, while rent growth is strongest across Sun Belt and Mountain region cities where demand has outpaced new supply.

Demand Remains Strong, Particularly Across The Sun Belt

Despite slowing rent growth, demand for medical office space remains resilient. Nationally, the sector recorded 6.24 million square feet of net absorption over the past year while maintaining a 91.5% occupancy rate—well ahead of traditional office assets. A relatively small number of markets, however, are driving much of that performance.

Houston led the nation with 847,074 square feet of net absorption over the past 12 months, supported by a robust pipeline of newly delivered medical office projects.

Orlando followed with 390,339 square feet absorbed, while Chicago, Phoenix and Dallas posted 318,880, 298,222 and 263,900 square feet, respectively.

Boston, Atlanta, Indianapolis, Las Vegas and Minneapolis rounded out the top 10 absorption markets, each recording between roughly 177,000 and 254,000 square feet of occupied growth during the year.

The occupancy leaders tell a different story, skewing toward smaller and mid-sized markets where development activity has remained relatively disciplined.

Omaha currently leads the nation with a 95.6% medical office occupancy rate, followed closely by Charlotte at 95.5% and Seattle at 95.4%.

Charleston and Madison both posted 94.3% occupancy, while Cleveland stood at 94.2% and Indianapolis at 94.1%. Miami, St. Louis and Nashville all maintained occupancy above 93%.

While these markets may not command the country’s highest rents or fastest growth, their tight occupancy levels suggest limited vacancy risk and continued potential for incremental rent increases if construction activity remains controlled.

Construction Activity Remains Measured But Targeted

According to Cresa’s data, medical office deliveries have slowed over the past two quarters, though development pipelines remain active—particularly in Texas and tertiary markets anchored by major healthcare systems.

Nationwide, approximately 10.48 million square feet of medical office space is currently under construction, compared to 8.12 million square feet delivered over the last year. The figures point to a market where supply growth remains active but not excessive.

Houston again stands out, delivering 897,829 square feet over the past year while still maintaining 257,849 square feet under construction.

New York City delivered 549,435 square feet, while Dallas, Orlando and Phoenix added 481,610, 349,280 and 344,500 square feet, respectively.

Boston, Tampa, San Antonio, Nashville and San Jose also ranked among the top markets for deliveries, each completing between approximately 230,000 and 311,000 square feet during the period.

Looking ahead, Dallas currently has the nation’s largest active pipeline at 671,588 square feet under construction, followed by Phoenix at 502,497 square feet.

Omaha—despite its smaller inventory base—has 427,448 square feet underway, while Indianapolis and New York City have 338,893 and 304,500 square feet in development, respectively.

Cleveland, Philadelphia, Pittsburgh and Miami are each building between roughly 252,000 and 296,000 square feet, underscoring continued developer confidence across both gateway markets and emerging healthcare hubs.

Where New Supply Could Shift Fundamentals

When construction activity is measured against existing inventory, the markets most vulnerable to changing fundamentals become easier to identify.

Nationally, development pipelines still represent a relatively modest share of total medical office inventory. However, several metros stand out.

Omaha represents the clearest example, with space under construction equal to 10.1% of its existing inventory—the highest level in the country by a wide margin.

San Francisco and Cleveland follow at 3.4% and 2.7%, while Phoenix’s pipeline equals 2.1% of inventory and Dallas stands at 1.8%. Pittsburgh, Indianapolis, Miami, Charleston and Atlanta all fall within a 1.6% to 1.7% range.

A separate analysis of active construction markets reveals a strong Sun Belt concentration.

Orlando leads with construction activity equal to 2.8% of inventory, followed by San Jose at 2.4% and Houston at 2.0%.

Nashville, Austin and Tampa all posted development pipelines ranging from 1.7% to 1.8% of inventory, while San Antonio, Charleston, Phoenix and New York City rounded out the top tier between 1.4% and 1.6%.

In many of these markets—including Orlando, Phoenix, Dallas and Tampa—elevated development activity aligns with strong absorption and above-trend rent growth, suggesting developers are largely responding to demonstrated demand rather than building speculatively.

A More Fragmented Medical Office Market Emerges

Taken together, the latest Cresa data points to a medical office sector where headline national metrics increasingly mask significant market-level divergence.

Rent growth has cooled overall, but high-rent coastal gateways, rapidly growing Sun Belt metros and healthcare-system-driven secondary markets are each playing distinct roles in the sector’s next phase.

For investors already familiar with the asset class, the opportunity now lies in identifying which metros combine tight occupancy with disciplined supply—and which markets may soon face a more meaningful test of demand as new construction delivers.

Source: GlobeSt