Revista outpatient report also lists last year’s most active developers in 2024
By John B. Mugford
Despite a persistent slowdown in medical outpatient building (MOB) development, some developers remained quite active in 2024. Remedy Medical Properties and its partner, Kayne Anderson Real Estate, broke ground in March 2024 for the Centra Langhorne Medical Center, a new 130,000 square foot MOB near Centra Lynchburg General Hospital in Lynchburg, Va. (Photo courtesy of Remedy Medical Properties)
The pace of medical outpatient building (MOB) development declined for the fourth straight year in 2024, reflecting persistent challenges in the sector.
That’s according to the newly released Revista 2025 Outpatient Real Estate Development Report, which summarizes 2024 data. The annual report is researched, compiled and published by Arnold, Md.-based Revista, which provides a wide array of healthcare real estate (HRE) data and statistics for its subscribers.
The Revista data documents the four-year slide in MOB construction starts, as both the number of starts and the total square footage fell steadily from 2021-24, although it was only a three-year slide in total annual construction value, which dropped from 2022-24.
MOB development declined in 2024 for the same reasons it did during the previous two to three years: rising construction costs, higher interest rates, harder-to-obtain debt and – probably lower on list – the uncertainties being faced by many health systems, which could be causing a number of them to take a bit of a pause on pursuing new projects.
In its research, Revista found that MOB construction starts totaled 371 in 2024, down 21 percent from the number of projects started in 2023, and down a whopping 43 percent from just three years earlier, in 2021, when MOB construction starts totaled 649.
As for the total amount of new MOB square footage started last year, it, too, was down from 2023 – but not quite as dramatically. In 2024, the amount of new MOB space started was 16 million square feet, down 8.6 percent from the 17.5 million started in 2023 and down 32 percent from 2022, when 23.6 million square feet of new MOB space broke ground.
Amid this three-year slide, one HRE development veteran, Greg Venn, CEO of Denver-based NexCore Group LLC, believes that the amount of outpatient projects, as well as the number of projects led by third-party firms – which saw a decline in 2024 – should pick up in the not-too-distant future.
“I’m optimistic that development, including third-party developed projects, will pick up, because health systems will still need to expand their services in a variety of markets, and the country’s aging demographics will continue to create demand for space,” he tells HREI™. “Even if the markets are down and health systems are uncertain about their financial situations, third-party developers can be a very useful resource for them to build the projects they need.”
It should be noted that Revista, which compiles MOB and HRE data through its RevistaMed service and life sciences real estate (LSRE) statistics through its RevistaLab service, considers medical outpatient space to include MOBs as well as general office buildings and retail centers with significant amounts of medical occupancy.
The yearly all-time high for project starts, according to Revista’s prior reports dating back to 2015, was the 28.9 million square feet of space that got underway in 2017 – about 45 percent more than the amount started in 2024.
That year, 2017, was part of a five-year stretch in which outpatient development was extremely strong, averaging about 25 million square feet of new projects annually.
However, as noted above, that amount started to decline during the past two to three years, dropping to 17.5 million square feet in 2023 and 16 million square feet in 2024, which marked the lowest total since Revista began its yearly Outpatient Real Estate Development Report with 2015 data.
“Starts were down again in 2024,” Stephen Lindsey, Revista research analyst, tells HREI. “In general, it looks as if the reasons for the drop in new project starts in 2024 were the same as in 2023, and those are the higher costs of construction and an interest rate environment in which rates have remained at higher levels and the players involved in the sector have been waiting for some interest rate stability.”
Mr. Lindsey noted that Revista’s most recent U.S. Medical Real Estate Construction Report published in the fourth quarter (Q4) of 2024 indicated that the overall cost of building outpatient projects in 2024 rose about 13 percent compared to 2023, continuing a multi-year trend of increasing construction costs.
Third-party projects see a decline
Atrium Health Wake Forest Baptist broke ground at 2909 Horse Pen Creek Road in northwest Greensboro, N.C., in October 2024 for a $163 million project including a new outpatient surgery center, multispecialty MOB and cancer center. (Photo courtesy of Atrium Health)
In terms of who is doing the developing, Revista categorizes projects in two ways: third-party developed and self-developed.
Revista defines third-party projects as those in which an outside development firm “oversees the full spectrum of development of a construction project to include the coordination of the contactor, architect, financing of the project, obtaining all permits and often overseeing the lease up of a construction project.” Third-party developed projects can include both those financed and owned by the developer as well as those in which the developer receives a fee for leading most aspects of a project.
Conversely, Revista defines self-developed projects as those financed and project managed in-house by the associated health systems or healthcare providers.
In light of all the financial challenges faced by hospitals and health systems, particularly during the past couple of years, many industry experts have been predicting that providers would become more willing to use third-party capital to finance new facilities projects. But those predictions do not appear to have come to fruition in 2024, as the percentage of projects started by third-party firms declined rather sharply.
Of all of the outpatient projects started in 2024, 101 projects totaling about 4.4 million square feet were started by third-party developers, whereas 270 projects with a total of 11.6 million were self-developed by health systems or other providers.
That means third-party development firms accounted for about 27.5 percent of all the outpatient square footage started last year, which is below the historic average of about 30 to 33 percent. A year earlier, in 2023, third-party projects accounted for about 41.7 percent of the projects started.
The year 2022 was perhaps the strongest for third-party developers, as they accounted for about 44 percent, or 10.5 million square feet, of the 23.6 million square feet of outpatient projects started during that year.
As noted, third-party developers accounted for 101 project starts, or 27.2 percent, of the overall 371 commenced in 2024.
The number of projects self-started by health systems or providers in 2024 fell to 270 – a record low, at least since Revista started compiling such data in 2015. But, with fewer project starts overall, that total still accounted for 72.5 percent of all outpatient projects started in 2024.
Completions as strong as ever in 2024
Interestingly, many of the developers HREI has spoken with recently tell us that they’ve “never been busier.” But how can that be when construction starts have been steadily declining?
More than likely, it’s because they have been busy finishing projects that were already in the pipeline.
Although outpatient project starts were down in 2024, the amount of space that was delivered was quite strong – historically strong, in fact, when it comes to the construction value of the projects, reflecting the high volume of projects that were started in 2021-22.
According to the Revista report, 501 outpatient projects with a total of 22.6 million square feet were delivered in 2024, an increase of 9.7 percent from 2023.
As for the value of the projects delivered in 2024, the $13.5 billion in aggregate value was the highest recorded by Revista, topping the next highest year of 2018, when the value of all completions was $12.5 billion.
Although third-party firms saw a slowdown in terms of the number of projects they started in 2024, they had a strong year in terms of the number of projects they completed.
Revista’s report indicates that third-party firms completed 168 projects in 2024 with a total of 9.1 million square feet of space. Their projects accounted for just more than 40 percent of all outpatient projects completed during the year.
The projects that third-party development firms completed in 2024 had an aggregate value of $5.5 billion, representing about 40.7 percent of the total value of all outpatient projects, which was $13.5 billion.
As for the amount of outpatient space started or completed in 2024, it totaled 38.4 million square feet, with 29.6 million square feet of that, or 77 percent, being on-campus projects or those affiliated with a health system. A total of 8.8 million square feet of the projects started or completed during the year were off-campus facilities, accounting for 23 percent of all projects started or completed.
The largest developers of 2024
Along with plenty of industry-wide, high-level market data, Revista’s annual development report also includes lists of the sector’s largest developers of outpatient projects.
In the category of projects started in 2024, Revista found that the most active developer was NexCore Group, which started four projects with a total of 390,765 square feet of space. Of its four projects started, three are on hospital campuses while one is an off-campus project.
“We continue to do what we’ve always done, and that’s to build on our strong relationships with our clients in this sector and to continue to do right by our clients and pay attention to the design of the projects, making sure they meet the needs of our clients,” notes Mr. Venn of NexCore, “and we always do our best to be very competitive, and that means being creative, with our capital. You need to do both, and I think because of our team we’ve been able to do that.
“The credit goes to the people in our firm who are leading the projects, like Jim Hartmann and Nathan Golick (both executive VPs of real estate development), and Tom Kelly (senior VP of real estate development), who are their working their tails off to maintain the relationships we have work hard for the systems and groups that we build projects for. When I think about the projects we’ve finished, we’ve always finished with good relationships with our clients, and that’s because of them.”
Mr. Venn added that as he spoke with HREI, Jarrod Daddis, the firm’s president, was in a meeting “raising capital right now. Kudos to Jarrod and Michael (Ray, chief investment officers) in their creative approach to capital, as we’re using more of a combination of high-net worth capital combined with institutional capital than we have in years past. It’s working well for us.”
NexCore’s pipeline moving forward is strong, Mr. Venn adds, noting that the firm has seven projects either underway or starting in coming weeks and months.
Second on the list of projects started in 2024 was Chicago-based Remedy Medical Properties, which broke ground on six projects with a total of 333,335 square feet of space. Three of its projects, with a total of 260,670 square feet, are on-campus facilities while the other three are off-campus MOBs.
“We’ve been having strong development numbers over the last couple of years,” says Joe Magliochetti, Remedy’s chief investment officer, “and we contribute that to our belief that our development business is a logical extension of our business as being one of the biggest committed investors in the space.”
Remedy, along with its longtime joint venture (JV) financial partner, Boca Raton, Fla.-based Kayne Anderson Real Estate, has been making total HRE facility acquisitions averaging about $1 billion annually in recent years.
“By being such an active investor in the sector, we build many strong relationships in the sector, which often leads to development opportunities,” Mr. Magliochetti explains.
Remedy’s development department does not look to be slowing down anytime soon, as it has projects totaling more than 600,000 square feet and a value “north of $400 million” scheduled to break ground in 2025, Mr. Magliochetti says.
The next three firms on the list in terms of project starts were Denver-based Healthpeak Properties Inc. (NYSE: DOC), which started three projects, all of them on-campus facilities, with a total of 255,000 square feet; Milwaukee-based Hammes, which started five projects, all of them also on-campus facilities, with a total of 249,833 square feet; and Woodbridge, N.J.-based Onyx Equities LLC, which started two project, both of which are on hospital campuses, with a total of 202,916 square feet.
In the category of completed projects in 2024, NexCore also topped the list, delivering six projects, five of which were on hospital campuses, with a total of 559,801 square feet of space.
Other firms in the top five for projects completed were: Golden Valley, Minn.-based Mortenson Company, which completed one project with 469,000 square feet of space; Washington, D.C.-based National Real Estate Advisors, which completed one project, an on-campus facility, with 452,000 square feet; Toledo, Ohio-based Welltower Inc. (NYSE: WELL), which completed five projects, one of which is on a hospital campus, with a total of 435,466 square feet; and, San Diego based PMB (Pacific Medical Buildings), which completed three projects, all of them being on-campus facilities, with a total of 332,928 square feet.
The most projects started/completed
Finally, in the category of projects started or completed, which is the measure of the largest outpatient developers of the year, NexCore took the top spot with 10 projects totaling 950,566 square feet of space started or completed. Eight of those projects are on-campus facilities, totaling 950,566 square feet.
Here’s a look at the top 10 development firms in terms of the amount of space they started or completed in 2024:
■ NexCore Group LLC, 10 projects started or completed, 950,566 square feet;
■ Remedy Medical Properties, eight projects, 534,218 square feet;
■ Mortenson Company, three projects, 524,657 square feet;
■ Hammes, 10 projects, 505,046 square feet;
■ Welltower Inc., 11 projects, 495,426 square feet;
■ National Real Estate Advisors, one project, 452,000 square feet;
■ PMB, five projects, 427,953 square feet;
■ Knoxville, Tenn.-based Realty Trust Group, five projects, 348,544 square feet;
■ Healthpeak Properties Inc., four projects, 315,000 square feet; and
■ Albany, N.Y.-based Columbia Development Cos., one project, 242,630 square feet.
How Revista gathered its data
Here is an explanation from the folks at Revista concerning how the data are gathered for their annual outpatient development report.
“The 2025 Outpatient Healthcare Real Estate Development Report measures medical office and other outpatient real estate that started or completed construction in 2024. Data are gathered from voluntary surveys and data derived from more than 170 companies.
“Overall, 38.4 million square feet of outpatient real estate was started or completed in 2024. Of this amount, 13.5 million square feet (35 percent) was started or completed by a third-party developer. Revista thanks the companies who participated in this survey and Healthcare Real Estate Insights for its guidance in producing this report.”
For more information, please visit RevistaMed.com.
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