The MOB Sector Growing Amid The Shift To Outpatient Care

According to JLL‘s latest report, “2025 Medical Outpatient Building Perspective,” the medical office building (MOB) sector will be shaped by key trends.

Here are the major insights:

Outpatient Care Expansion

Healthcare systems and corporate medical groups are increasingly focusing on outpatient settings as a complement to their inpatient services. As a result, finding strategic locations to serve patients and grow market share is now a top priority, the report notes.

Rising Demand vs. Limited Supply

The demand for MOBs is being driven by health systems, corporate medical groups, and independent providers. However, the supply remains constrained due to factors like higher construction costs, rising borrowing rates, and uncertain capital markets. According to the report, with limited new spaces available, healthcare tenants—particularly those in lower- to mid-acuity care—are increasingly considering office and retail spaces that are close to their target patient population or near hospital campuses.

Increase in Net Operating Income (NOI)

While rent growth saw a slight decline in 2024, the highest-tier rents in the MOB market have continued to outpace the lower- and mid-tier rents. Many tenants are choosing to renew their leases, with average lease terms for new agreements at 107 months, providing investors with stable, long-term rent increases. The report suggests that steady rent growth for existing properties will continue, despite increasing tenant cost pressures.

Investor Confidence

MOBs remain a desirable investment due to tenant stability and the higher likelihood of lease renewals. Nearly 50% of the 1.4 billion square feet of medical outpatient buildings are owned by healthcare systems and providers. Looking ahead, in 2025, investors are expected to explore opportunities to repurpose existing office spaces for medical uses to boost value.

Outlook for 2025 and Beyond

The report forecasts the following for the future:

• Key demand drivers include an aging population, rising disease prevalence, and the need for services close to expanding populations.
• Challenges such as the rise of home care and telehealth, workforce shortages, and slower population growth could present obstacles.
• Political changes and policy uncertainty may disrupt the sector as well.

Source: connectcre