‘Volatility Creates Opportunity’ For Investment In Medical Office Sector

Medical office buildings have become a favored asset class for investors, standing out as resilient amid broader economic and commercial real estate uncertainty.

Investment in the sector surged to $14.4 billion nationwide last year — a 67.3% increase from 2023, though still below the $20.5 billion recorded in 2022, according to Colliers. Average sale prices climbed from $302 to $339 per square foot, and vacancy rates have steadily dropped for 15 consecutive quarters, reaching 7% at the end of 2024.

In Boston, the medical office market remains strong, even as traditional office and industrial spaces face headwinds from persistent remote work and the impact of President Donald Trump’s tariffs.

Speaking at Bisnow’s Boston Healthcare and Campus Development event, Newmark Senior Managing Director Michael Greeley emphasized that investor demand remains high.

“Despite all the geopolitical and macroeconomic challenges, there’s still plenty of capital for medical outpatient buildings,” Greeley said at the Westin Copley Place. “In times of broader market turmoil, these assets continue to serve as a stable cornerstone in institutional portfolios.”

While Boston is among the top 10 U.S. markets for medical office space, it delivered the least new inventory in that group last year—just 91,000 square feet. Greeley noted that limited development has sharpened investor focus on acquisitions.

“It’s a window of opportunity,” Greeley said. “Deals are harder to close right now, which actually creates advantages for those already in the game.”

Jennifer Wong, director of acquisitions at AEW Capital Management, echoed that sentiment.

“Recent interest rate changes and trade policy disruptions have opened doors for savvy investors,” Wong said. “Volatility creates opportunity. Groups sitting on the sidelines can’t match the first-mover advantage of firms already embedded in the space.”

AEW, which partners with Flagship Healthcare, acquired an eight-building portfolio of surgery centers and medical offices across seven states in 2022. Wong said her firm is currently focused on acquiring single-tenant outpatient properties near hospital systems rather than taking on costly new developments.

“Construction just doesn’t pencil out right now,” Wong said. “We see greater value in acquiring existing assets.”

The trend is playing out across the country. In early 2025, National Healthcare Properties sold a 10-building, 300,000-square-foot portfolio to a joint venture between Altera Fund Advisors and TPG Angelo Gordon for $108 million. In another deal, Bain Capital and Evergreen Medical Properties acquired a medical office property in Washington, D.C., for $45.5 million.

Conversions are also gaining traction as an alternative to ground-up construction. US HealthVest Chief Development Officer Martina Sze said her firm has focused on repurposing office buildings into behavioral health centers — a sector experiencing sustained demand since the pandemic began.

“2024 was a strong year for us,” Sze said. “Mental health needs keep rising, and we’ve leaned into that by expanding internally.”

US HealthVest partnered with UMass Memorial Health to convert an old Worcester office building into a 120-bed psychiatric hospital in 2017. The facility later sold for $27 million.

“Conversions are faster and cheaper,” Sze added. “You skip zoning hurdles — we actually prefer renovating over new builds.”

Source: Bisnow