Press Release
FOR IMMEDIATE RELEASE
Long-Term Healthcare Trends, Strong 2024 Performance Bolster Outlook for Medical Outpatient Buildings
CBRE expects momentum for MOB sales and leasing activity in 2025
Boston leads for net absorption, New York for new construction
Dallas – Nov. 25, 2024 – The market for U.S. medical outpatient buildings (MOBs) is poised for lower vacancy and higher rents, leasing activity and sales transaction volume in 2025, according to CBRE’s 2025 U.S. Healthcare Real Estate Outlook report.
CBRE forecasts that MOB asking rents will rise by up to 1.8% in each of 2025 and 2026 and vacancy will decline slightly to 9.46% by the end of 2025 from 9.57% in this year’s third quarter. CBRE also foresees lower interest rates, easing inflation and growing demand for healthcare services bolstering MOB leasing and sales activity next year.
“The medical outpatient building market is propelled by long-term demographic and health care spending trends that sustain a rising trajectory. This distinguishes the sector from other property types that are often affected by short-term economic cycles,” said Bryan Johnson, CBRE Americas Healthcare Leader. “How, where and when healthcare services are provided evolves over time, but it’s a certainty that the U.S. population will demand more healthcare services going forward.”
CBRE defines the MOB sector as buildings constructed for, or renovated to, house patient care outside of hospitals. That includes facilities for primary care physicians, dentists, behavioral clinics and other medical specialists. Also included are urgent care centers, surgery centers and addiction treatment clinics.
The anticipated gains in 2025 would come after a few volatile years for the MOB sector. The sector slowed in 2023 due to high interest rates and construction costs and a falloff in leasing of administrative space by large healthcare systems due to hybrid work. This year, the sector hit an inflection point amid the prospect of lower interest rates, growing demand for healthcare services, healthcare job growth and technological advancements allowing more medical procedures to shift to MOBs from hospitals.
Among the 2024 metrics that bode well for the sector going forward: U.S. healthcare employment grew by 4.7% in this year’s first quarter from Q1 2023, compared to overall job growth of 1.8%. MOB construction completions have gradually declined since peaking in Q1 2023, contributing to the sector’s declining vacancy and rising rents this year.
Additionally, MOB sales volume increased to $2.51 billion in this year’s third quarter, up 48% from a year earlier. That marked the second consecutive year-over-year increase following nearly two years of declines.
On a market level, Houston generated the most net absorption in 2024 but will likely be surpassed by Boston in 2025, according to CBRE’s forecast. Several markets that CBRE expects to register strong absorption next year also have significant construction pipelines, including Dallas, Houston, Washington, DC., Orlando and Atlanta.
To read the full report, click here.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2023 revenue). The company has more than 130,000 employees (including Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
Contact:
Kris Hudson
+1 214 863 3650
kris.hudson@cbre.com
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