MOB Investment Rises In Q3 2025 Amid Record-High Rents
Across 59 U.S. markets, MOB investment activity rose sharply in Q3, with volume up 27% quarter-over-quarter to $2.7 billion.
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Return Of In-Person Appointments Is Spurring Medical Office Demand In South Florida
As in-person medical appointments resume, the demand for medical office space for the aging population in South Florida has enhanced.
At the beginning of the pandemic, medical offices weathered the downturn better than traditional offices, but as new COVID-19 variants emerge and appointments continue, there is strong tenant demand.
According to the 2022 U.S. Medical Office National Report, the medical office vacancy rose 80 basis points to 9.5% in 2020, less than a third of the jump that was seen in traditional offices.
Late last year is when availability started to get tighter, benefiting rent growth. The report says the average asking rate national was $22 per square foot, which is up more than 4% since the end of 2019.
In Palm Beach, JLL Capital Markets recently closed the sale of a two-building medical office plaza in Boynton Beach. Although the price of the sale is unknown, the average rental price is $21.50 per square foot.
Woolbright Medical Plaza, located at 1700 and 1800 Woolbright Road, consists of two institutional-grade medical office buildings totaling 33,151 square feet.
JLL represented the seller, TopMed Realty, a private equity firm in Hallandale Beach, in the sale to AW Property Company, a real estate investment, and operating company in Palm Beach Gardens.
A surging population and large concentration of senior citizens in Palm Beach County are driving the demand for health care services. The medical center is adjacent to a 55+ community with 1,800 single-family homes and 500 apartments called Leisureville.
The building is also near Baptist Health Bethesda Hospital East, a 401-bed building and one of the largest health systems in South Florida. JLL Capital Markets closed the sale of the two-building Woolbright Medical Plaza in Boynton Beach.
TopMed rebranded Woolbright Medical Plaza from an office complex to a medical office plaza. It went from 63% to 93% leased. Tenants include physician groups providing radiology and imaging, ENT, primary care, dentistry and physical therapy services.
Source: DBR
Investors Target Medical Office In Defensive Play
Demand for medical office space has mostly normalized, with investors pouring capital into the asset class in what some experts are calling a defensive strategy.
“While some people continue to practice caution amid the emergence of new COVID-19 variants, ultimately many of these appointments must be fulfilled,” Marcus & Millichap’s Alan Pontius writes in a new report. “All the while, the population is aging, which brings along certain medical realities. These factors together underpin the current strong tenant demand for medical offices.”
While traditional offices saw a major rise in vacancy at the onset of the pandemic, medical office vacancy rose just 80 basis points to 9.5% in 2020. Availability tightened at the tail end of 2020, which drove the average asking rental rate up to $22 per square foot, an increase of nearly 4% from the end of 2019. Asking rents were highest in San Francisco, followed by New York City, Los Angeles, San Jose, Miami-Dade, Oakland, San Diego, Orange County, Seattle-Tacoma, and Washington, D.C. Meanwhile, vacancy was lowest in 2021 in San Jose, Portland, Louisville, Seattle-Tacoma, and Salt Lake City.
Supply additions expected this year are on par with 2020 figures, with an estimated 9 million square feet of space projected to open this year. Marcus & Millichap predicts that vacancy will decrease to 9.2%, down 20 basis points and 40 basis points above pre-COVID levels. Meanwhile, the firm predicts rent growth in the neighborhood of 2.5% to an average of $22.61 per square foot, with six markets predicted to hit levels above $30 per square foot led by the Bay Area, New York, Miami-Dad, and Los Angeles.
Staffing shortages remain a headwind for the sector in the short term, as the health crisis continues to hit healthcare worker payrolls. Stated simply, healthcare workers are burned out, and “medical practices are aware of this dilemma,” according to Marcus & Millichap, adding that 73% of those surveyed in a recent national poll ranked staffing as their largest pandemic-related challenge at the start of this year.
“The inability to onboard staff may keep medical practices from expanding this year, combating what are otherwise strong demand tailwinds,” Pontius says.
Source: GlobeSt.
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