The Year Of The Medical Outpatient Building
A look at the year ahead for healthcare will significantly impact the industry’s commercial real estate, says CBRE Research.
Specifically, an aging population, growing healthcare spending, transformative technologies, and consumer preferences will make medical outpatient buildings (MOB) an increasingly popular choice for care delivery.
This new MOB is stepping in where an older use of the acronym, medical office building, which had been a regular part of the landscape has been taking some hits in 2024. In the first half of the year, Cushman & Wakefield’s short take was that volume and pricing remained muted, although there was continued resiliency in the category.
That pushed back the most similar competitor to medical outpatient properties. Both are separate from direct integration into hospital campuses, but the newer MOBs address some fundamental forces in healthcare. That might be why, according to CBRE, medical outpatient vacancies fell during 2024. Associated capital market activity “improved considerably” by the midyear as the sector saw the first annual sales transactions increase and cap rates decrease since mid-2022.
CBRE said the biggest driver of outpatient facilities is the aging U.S. populace, with 61 million people aged 65 and over currently 14% of the total population. By 2030, that’s expected to be 70 million, representing 20% of everyone, as the last of the baby boomers reach retirement age. Seniors will cause healthcare spending to jump by 31% to a total of nearly $2 trillion. As people age, the average per-capita annual healthcare spending of $8,000 for those under 65 jumps to $20,000 for 65-to-84 and then leaps to $35,000 for those over 85.
Healthcare in the U.S. has been incredibly expensive, hovering at more than 17% of GDP according to the Centers for Medicare & Medicaid Services. An ongoing increase will drive it even higher. The industry — the country — can’t afford the costs of running away even more.
Outpatient facilities can help because hospitals with their overhead are the most expensive places to deliver care. New technologies are expanding the range of services available in such facilities. CBRE offers the figure that the average cost of a gall bladder operation in a hospital is as high as $12,000. Ambulatory care centers can get the same work done for $2,200. Average savings of 59% for a range of features are realizable. CBRE projects that occupied medical outpatient building space will reach a record in 2025.
Outpatient building construction is generally happening off hospital campuses and closer to densities in residential locations and properties, offering greater patient convenience. Although physicians prefer adjacency to or placement on hospital campuses for better insurance reimbursement rates, driving such facilities to be 150% the size of off-campus properties, the ultimate economics will push outward with an average size of 26,500 square feet.
Triple-net asking rents were up 14% year over year in 2024 Q2, hitting $24.86 per square foot. CBRE expects rent growth between 1.4% and 1.8% through 2026 with the vacancy rate to fall below 9.5%.
Source: GlobeSt.
For more information contact us:
954.346.8200 x 201
