The Medical Office Investment Market

State of the CRE Medical Office Investment Market

The medical office market continued to thrive in 2021 and throughout 2022. The medical office sector set record highs for sales volume in 2021. Transaction volume and investment activity are strong indicators of the strength of any asset class. Investors, particularly institution investors have been very active in the medical office market. The aging population has increased the demand for these properties and investment activity is only expected to increase as medical office proves to be market resilient and demonstrate high occupancy, making it one of the most stable and attractive assets.

The demand is outpacing the supply, as vacancy remains tight and development activity is continuing to increase. This can be seen through rental rate increases. The rents are now on the rise after remaining relatively steady over the last 5 years. Rental rates are increasing and expected to be profound at new specialty built medical office buildings due to the skyrocketing construction costs. The increased average price per square foot is a factor attributed to the limited supply.

Overall, the medical office is one of the most resilient asset classes and has proven that through both a pandemic and economic downturn. The sectors resiliency, as well as the strong underlying fundaments, has increased the overall investment activity. We can expect to see more investors, institutional and individuals, pour capital into the medical office market as we navigate the turbulent second half of 2022.

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Questions about healthcare real estate or this article? Reach out to the Rokos team today. We are here for you and happy to help.

Rokos Advisors is an award-winning Minneapolis – St. Paul-based commercial real estate/tenant representation firm specializing in helping businesses find the perfect office or industrial space for their company.

*Article authored by Rokos Senior Associate, Jake Sampson