Are Medical Office Buildings A Good Investment?

If you’re looking to get started in commercial real estate or weighing your options for your next investment, here are a few key considerations that highlight why a medical office building could be a solid choice.

[Pictured]: CHI Memorial Medical Office Building, located in Chattanooga, Tennessee, currently sits at 100% occupancy.

Key Insights

MOBs are facilities specifically designed and constructed for healthcare providers and related services. These buildings typically accommodate a variety of medical practices and specialties, such as primary care, specialist physicians, diagnostic imaging, outpatient surgery, and physical therapy.

Here are a few reasons why MOBs are growing in popularity:

• Resilient Sector
  There are few sectors as resilient as the healthcare industry. Although technology has paved the way for virtual visits and has modernized various aspects of the medical world, there is still an ever-growing need for in-person services. The Centers for Medicare & Medicaid Services (CMS) projects just how rapid this growth is, and will continue to be in their 2022-2031 National Health Expenditure Projections. They state that “the U.S. healthcare industry is projected to grow from $4 trillion in 2020 to $6.2 trillion by 2028, reflecting a compound annual growth rate (CAGR) of 5.4% over this period.”
• Low Vacancy Rates & Strong Rental Rates
  Medical office buildings (MOBs) have consistently maintained low vacancy rates, setting them apart from traditional office spaces. According to the 2024 Healthcare Marketplace Report by Colliers, “In 2023, rent growth in four of the top 10 leading U.S. MOB markets was above the national average of 2.25%. Miami led the pack with the highest growth, at 2.9%, closely followed by Atlanta, 2.8%, and both Dallas and New York, 2.6%.” The low vacancy rates can be attributed to the significant investments medical tenants make in their spaces to accommodate specialized equipment and infrastructure, making relocation a costly endeavor. Furthermore, medical tenants typically sign longer lease terms compared to traditional office tenants, resulting in a more stable and predictable income stream for investors.
• Steady Investment Returns
  Investors in MOBs are tapping into a lucrative opportunity fueled by the relentless demand for healthcare services. As the population ages and medical needs escalate, MOBs offer a steady stream of reliable returns. However, the supply of these properties lags behind the soaring demand, making existing medical office properties particularly valuable and attractive for investors.

At our firm, we’re continuing to expand into the medical office sector and would be happy to discuss upcoming MOB opportunities with you further. Feel free to reach out to our team by responding directly to this email, or join our Active Investment Community to get started.