An aging population, surge in outpatient demand and the ever-present need for services near growing populations are all contributing to strong demand in the healthcare sector, according to the latest healthcare real estate report from JLL.

According to Advisory Board, outpatient volumes in the U.S. are expected to grow 10.6% over the next five years. JLL’s new 2025 Medical Outpatient Building (MOB) Perspective reveals the key trends shaping the healthcare real estate landscape, including the accelerating move toward outpatient care, rising occupancy, limited construction for purpose-built MOBs, steady rent growth, demographics driving expansion in Sunbelt markets and medical buildings offering continued stability for investors and health systems.

“These findings reflect the ongoing transformation of the healthcare real estate landscape, driven by factors such as changing patient preferences, technological advancements and demographic shifts,” Cheryl Carron, COO, Work Dynamics Americas, and President, Healthcare Division, JLL. “Health systems are taking a more active role in shaping their real estate portfolios and, along with corporate medical groups, are at the forefront of change, implementing ambitious ambulatory care strategies to improve patient outcomes and optimize their revenue streams.”

Health systems and corporate medical groups lead the outpatient shift

An aging population and increasing disease prevalence continues to drive the overall need for care. The site of care shift from inpatient to outpatient will continue as technology and patient preference is driving advances in medical care, making treatments less expensive, safer and less invasive.

Health systems are leaning into this and are expanding their real estate footprint and either acquiring or contracting with physician groups to add specialties. From 2022 to 2023, 16,000 additional physicians became employees of a hospital system, and health systems accounted for 46% of MOB leases that JLL tracked in 2024. Specialty providers comprised 31% of the MOB leases, with psychiatrists and behavioral health providers making up the largest group of these, accounting for 18% of this square footage.

“We’re seeing a clear trend of hospitals and health systems focusing on high-value services such as orthopedic and cardiovascular care,” said Matt Coursen, Executive Managing Director, Market Leader, Mid-Atlantic Healthcare Group, JLL. “These healthcare providers prioritize access, convenience and visibility for their outpatient locations, in some cases mirroring retail tactics to capture market share either via acquisition or de novo growth. Their site selection process is intricate, involving analysis of patient data, community demographics, care gaps, population growth, insurance coverage, referral networks and competitor proximity. Hence, why it is more important than ever to have a data-driven ambulatory network strategy that aligns with the real estate portfolio.”

Healthcare tenants may seek alternative spaces due to limited medical office availability

Strong demand and limited construction have driven occupancy steadily upward, with absorption for medical outpatient buildings topping 19 million square feet for the top 100 markets in Q4 2024, an increase of 15% from full-year 2023, according to Revista. MOB occupancy increased to 92.8% in Q4 2024, up from 92.4% one year prior; however, medical outpatient building construction remains subdued due to elevated costs, developers’ need for higher returns and tenants’ desire to control expenses.

Health systems led construction starts in 2024, accounting for 53% of total square footage and a significant increase from just 43% in 2019. Healthcare providers, especially those offering low- to mid-acuity services, are increasingly exploring office and retail spaces near patients or hospitals due to limited MOB availability, despite conversion challenges for high-acuity services or resource-intensive services like imaging.

“With medical outpatient building occupancy reaching new heights and construction starts lower than in previous years, healthcare tenants may increasingly consider office and retail spaces for their expansion needs,” said Dan Squiers, Executive Vice President and Healthcare Lead, Project and Development Services, JLL. “This trend is reshaping not just the healthcare real estate sector, but also impacting traditional commercial real estate markets and reflects the strategic importance of real estate in delivering cutting-edge healthcare services and optimizing patient outcomes.”

Medical outpatient rents are rising, boosting property income

MOB rents continue to rise, albeit at a slower pace from 2023 to 2024. Top-tier properties have experienced faster growth, with rents in the 90th percentile of Revista’s Top 100 markets growing at a 2.3% CAGR from 2019 to 2024, compared to 1.8% for median rates. The low availability rate of 6.9% in Q4 2024 means advertised rates don’t tell the full story, as many tenants renew in place and some spaces are not publicly listed.

Healthcare REITs are benefiting from steady NOI growth, with new lease escalations averaging 3% in 2024 and average terms of 107 months; however, tenants face challenges as rate escalations outpace year-over-year rent growth in most markets. With slim operating margins and declining reimbursements, healthcare providers are keen on cost reductions across the system, which may limit dramatic rent increases in the future.

“While medical outpatient building rents are expected to continue their upward trajectory, we anticipate steady rather than steep growth,” said Kari Beets, Senior Manager, Healthcare Research. “The healthcare sector’s financial constraints, including tight operating margins and reimbursement pressures, will likely moderate rent increases compared to premium office submarkets experiencing a flight to quality.”

Sunbelt population growth and established healthcare brands fuel market expansion

While Sunbelt markets are seeing significant growth due to population shifts, the report details strong performance in markets like Boston and Northern New Jersey that benefit from the presence of established, growing health systems with strong brand recognition, which can support growth through fundraising and attract high-value specialties.

Markets with strong rents and occupancy are spread throughout the country, with four Sunbelt markets seeing rent growth over 3% – Miami, Orlando, Austin and Tampa. New York led all markets with new outpatient services move-ins in 2024 for both leased and owned space. Although Philadelphia led all markets in 2024 MOB net absorption, with Houston and Atlanta posting more than 400,000 square feet of net absorption each, the Norfolk/Hampton Roads, Virginia, area saw strong absorption compared to total inventory.

Medical properties attract investors and health systems with stable returns

Medical buildings continue to offer stability for investors, and health systems also see benefits to ownership. Medical outpatient transaction volume increased in 2024, bolstered by significant acquisitions in the sector.

The report also provides insights on the future perspective of the MOB market, including potential challenges and opportunities for developers, health systems, tenants and investors. Key considerations include the impact of changing healthcare delivery models, challenges posted by limited supply pipeline and the role of technology in shaping future healthcare real estate needs.

“The stability and growth potential of medical outpatient buildings continue to attract investors,” said John Chun, Senior Managing Director and Medical Properties Group Leader, Capital Markets, JLL. “With average lease escalations of 3% and terms for new leases averaging almost nine years, MOBs offer a compelling investment opportunity in today’s market.”

Future perspective

Healthcare demand remains robust due to an aging population and increased outpatient needs; however, potential challenges may impact demand for medical outpatient spaces and shake up the healthcare sector.

“Looking ahead, we anticipate continued evolution in the healthcare real estate sector,” added Carron. “Factors such as the shift to home-based care, telehealth advancements, changing healthcare policies and demographics will all play a crucial role in shaping the design and demand for medical outpatient space. Stakeholders across the industry will need to remain agile and forward-thinking to capitalize on these emerging trends.”

RangeWater Real Estate and equity partner CenterSquare Investment Management acquired an upscale residential community in the growing Frisco submarket of the Dallas-Fort Worth metro area.

The joint venture purchased Sorrel Phillips Creek Ranch located at 5050 Farm To Market Road 423 in Frisco. The acquisition is part of rental housing industry leader RangeWater’s strategy to continue meeting housing demand by purchasing communities in desirable neighborhoods across the Sun Belt. The acquisition was an off-the-market deal, and the price was not disclosed.

RangeWater is actively seeking new land sites and existing properties throughout the Dallas-Fort Worth MSA. The company currently manages more than 3,000 units across 17 properties in Texas. Sorrel is the firm’s ninth community under management in the Dallas-Fort Worth metro area.

Sorrel Phillips Creek Ranch features 352 luxury one-, two-, and three-bedroom homes, ranging from 776 to 1,476 square feet. Built in 2015, the pet-friendly apartment homes offer open floor plans complete with plank wood-style flooring, soaring 9-foot ceilings, upscale kitchens, and sophisticated crown molding.  The upscale floor plans feature walk-in closets, stainless steel appliances, granite countertops, walk-in showers, and soaking tubs. 

JPI has officially broken ground on Jefferson Morningstar, a 373-unit, four-story, garden-style multifamily community in The Colony, Texas.

This project marks JPI’s first partnership with Nomura Real Estate Development Co., Ltd., and is a significant milestone in the development of this rapidly growing area. Additionally, JPI is partnering with Yoram Avneri, the original owner of the land, to bring this exciting project to fruition. 

Jefferson Morningstar will be ideally situated near major employers in the Dallas-Fort Worth metroplex, including those in Plano and Frisco. The community will offer a variety of studio, one-, two-, and three-bedroom apartments, designed to cater to a broad spectrum of residents. With high-end finishes and modern amenities including a fitness center, dog park, co-working spaces, and a clubhouse overlooking a resort-style pool, Jefferson Morningstar promises to deliver an exceptional living experience. The development will create a vibrant live-work-play environment that balances comfort with convenience. 

The first homes at Jefferson Morningstar are expected to be available for lease in 2027. 

DWG Capital Partners acquired a 78,600-square-foot, 27.79±-acre industrial manufacturing campus in Cameron, Texas, via a sale-leaseback transaction with The Butler Weldments Corporation for an undisclosed sum.

Privately held Butler Weldments, a manufacturer of fabricated and machined metal products for the military and industry leaders across various commercial sectors, has made extensive renovations in recent years. The company will continue to occupy the site under a 20-year NNN lease.

Located at 1200 & 1279 Industrial Boulevard within an Opportunity Zone, the multi-building property comprises manufacturing, warehouse, office and storage space.

Jonathan Ameen and Mark Grossman of Northmarq’s Tulsa office represented the seller in the off-market transaction with DFW-based DWG Capital Partners, led by founder and principal Judd Dunning. 

During the COVID-19 pandemic, lockdowns and restrictions meant that consumers spent significantly more time at home, leading to a surge in the reliance on e-commerce to obtain goods. As a result, e-commerce saw unprecedented growth, with global online sales increasing by 27% in 2020 alone, marking one of the sharpest yearly upticks in history.

This growth spurred distributors to rethink their sales strategies, with as many as 84% of them projecting a shift to selling 100% of their product online in the future to align with changing consumer behaviors.

To keep up with this demand, distributors embarked on an aggressive expansion of industrial facilities, including warehouses, fulfillment centers, and distribution hubs, aimed at faster last-mile delivery and reduced supply chain lag. Since 2020, over 1.8 billion square feet of industrial construction was added across the U.S., a record-breaking figure that doubled the average industrial space delivered in the years preceding the pandemic.

However, post-pandemic demand dynamics shifted, and the intense growth in e-commerce moderated as consumers returned to in-person shopping and supply chain issues began to stabilize. This deceleration in demand led to a cooling of industrial real estate activity, resulting in an uptick in vacancy rates. The industrial sector now faces the challenge of filling these vacant spaces that were catalyzed by the pandemic-driven e-commerce boom.

Industrial properties adjust to new supply

The surge in new industrial facilities built during the pandemic caused an oversupply, outpacing demand and keeping vacancy rates high. By year-end 2024, the national industrial vacancy rate reached 6.9%. This metric rose for nine consecutive quarters, with a 30-basis-point average increase month-over-month.

Tampa noted one of the highest vacancy rates nationally as it reached 5.6% at the end of Q3 2024—a level not seen in the market in over eight years. The significant influx of new supply in Tampa outstripped absorption, with a notable -1.2 million square feet in absorption recorded during Q2 2024 alone.

Across the country, San Diego was also heavily impacted by the supply flood. At the end of Q3 2024, the market’s industrial segment noted a 10-year high vacancy rate of 7.6%, driven by a significant uptick in speculative construction and sublet space. Around 2 million square feet remains up for lease due to the new supply additions. Leasing activity for industrial facilities here is not expected to pick back up until the second half of 2025.

Construction costs contribute to industrial environment

To balance the absorption rate of new industrial properties and adjust for softer demand post-pandemic, construction starts have decreased significantly across the U.S. From 2022 to 2023, construction starts fell by more than 40%, with 341.9 million square feet breaking ground in 2023. At the end of Q3 2024, industrial square footage underway fell 43% from 2023. Only 90 million square feet of industrial space was delivered during Q3 2024, the lowest level of deliveries since Q2 2020, when completions totaled 86.9 million square feet.

Increased construction costs were a contributing factor to the decrease in industrial developments as well. As of March 2024, construction pricing grew 2.6% on a year-over-year basis; at the same time, building costs jumped by 3.8%. The pricing for smaller-sized projects increased the most across the country, growing by 17% over 2023 costs and now averaging $142 per square foot.

The Denver market was strongly affected by the increase in construction costs. It currently stands as one of the most expensive cities to fund medium- and large-sized industrial developments. This pricing pressure, along with the abundance of new supply over the past decade, contributed to Denver’s vacancy rate of 7.6% at the end of Q3 2024, which is among the highest industrial vacancy rates nationally. Together with economic uncertainties, these factors contributed to a significant slowdown of new developments, allowing vacancy rates to normalize in the quarters ahead. With that said, smaller properties here have seen the highest level of absorption, with around half of new leases signed over the past year involving properties under 100,000 square feet.

Sales remain stable as new construction is underway

Other West Coast markets have been instrumental in sustaining transaction velocity—particularly in California, which noted increased sales compared to other regions in the country. Los Angeles, specifically, ranked third nationally for sales volume as the market noted more than $2 billion in transactions over the past 12 months. Logistics-focused properties—including warehouse and distribution, plus flex buildings—have been pivotal, with these properties trading at $330 and $400 per square foot, respectively. Following this trend, the largest sale for Los Angeles in 2024 was a warehouse facility that sold for $86 million, or $426 per square foot.

Although developments across the U.S. decelerated compared to the pandemic peak, construction activity is still high compared to historical standards. By the end of 2024, about 195.8 million square feet will be delivered, aligning with the pre-pandemic construction levels seen in 2019.

Phoenix is a market that stands out nationally for its active industrial development pipeline. Since 2021, around 90 million square feet of industrial space has been added to the metro, and an additional 36.8 million square feet is currently under construction. The new additions make Phoenix the most active market for industrial activity across the country. Many of the projects cater to larger properties that are greater than 100,000 square feet, contributing to the vacancy rate for industrial facilities in this category reaching 14.8% by Q3 2024.

Source: AZBigMedia

Looking ahead to industrial balance

E-commerce demand is on the rise again, with $288.8 billion in online sales occurring in Q3 2024, a 2.2% uptick from Q2 2024. This marks the seventh consecutive quarter of increased activity, translating to a sustained need for additional square footage for warehousing, distribution centers, and last-mile delivery facilities. The increase in sales activity for e-commerce will contribute to absorption metrics moving forward.

Similar to Amazon’s pandemic-era expansion, where the company secured large industrial spaces to meet growing demand, Amazon has recently leased over 1 million square feet across California and Arizona, pushing absorption levels up more than 30% compared to 2023. In line with this growth, Amazon has increased its warehousing and storage workforce, adding 10,700 employees in July 2024. This hiring boost parallels the spike in employment seen when Amazon expanded its footprint during the pandemic, signaling that the e-commerce resurgence is driving both square footage demand and employment in the industrial sector.

Beyond e-commerce, data center demand is also aiding industrial absorption, driven by the growth in artificial intelligence (AI). For example, in June 2024, OpenAI announced that it would rent out a space in Abilene, Texas that would be capable of delivering up to one gigawatt of power by 2026.

Phoenix is set to benefit from similar data center growth, with data centers comprising 18% of the existing industrial market inventory. Stream Data Centers is developing four new facilities in Goodyear, adding 403,000 square feet by August 2025. This expansion is anticipated to boost absorption rates, reducing vacancy in the Phoenix industrial market and strengthening its position as a key data center hub.

Another Texas market that has seen increased industrial absorption is Dallas-Fort Worth. Since 2020, big bomber industrial properties made their way into the metro, and now make up 118 facilities. These sites are over 500,000 square feet, and are favorable because of their long-term leasing capabilities. Google is one tenant that was enticed by these spaces in the metro. Over the last six months, the firm took up more than 2 million square feet in two leases.

Apart from recent trends boosting leasing demand for industrial spaces, construction activity is expected to taper by mid-2025, which should begin to balance leasing activity with the supply wave left over from recent years. New addition activity nationally was noted at 147 million square feet during the second half of 2023 and has continued to fall since then. By the end of 2025, industrial construction is expected to note a 10-year low.

Retailers Leading E-Commerce Activity in 2024

Online Retailer	Market Share
Amazon	37.6%
Walmart	6.4%
Apple	3.6%
eBay	3.0%
Target	1.9%

Source: Statista

Spencer Mason is a real estate professional at Matthews Real Estate Investment Services specializing in the acquisition and disposition of industrial properties.

 JLL Capital Markets closed the sale of NOVA Apartments, a 412-unit multifamily community in San Antonio, Texas.

JLL represented the seller, Metlife Investment Management.

NOVA Apartments at 14200 Vance Jackson Road offers residents quick access to major highways I-10 and Loop 1604, seamlessly connecting them to the greater area. The community is conveniently adjacent to The RIM and La Cantera districts, placing a variety of dining, shopping and entertainment options just moments away.

NOVA Apartments, built in 2009 and sprawling across 31 acres, boasts a total rentable space of 352,912 square feet. Renowned for its timeless construction quality, the community competes strongly with class-A properties through its blend of renovated and classic units. Residents can enjoy an array of amenities such as resort-style pools, dog parks, an EV charger, a jogging trail and a state-of-the-art fitness center, enhancing the appeal of NOVA as a leading residential choice.

JLL Capital Market’s Investment and Sales Advisory team representing the seller was led by Managing Directors Robert Arzola and Ryan McBride and Senior Managing Director Robert Wooten.