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.”
