Tight Supply Drives MOB Rents Higher

Executive Summary

• Medical outpatient building (MOB) investment volume jumped by 122% quarter-over-quarter in Q4 to $6.1 billion, driven in part by the $2 billion sale of the first three tranches of Welltower’s 18 million-sq.-ft. portfolio to Remedy.
• Annual MOB investment volume increased by 35% year-over-year to $12.6 billion, the highest annual total since 2022.
• The average MOB sale price increased by $2 or 0.7% per sq. ft. quarter-over-quarter to $300, while traditional office building prices decreased by 2.5% to $192 per sq. ft
• The average MOB cap rate rose by 9 basis points (bps) quarter-over-quarter and 7 bps year-over-year to 7%.
• Washington, D.C. was the top market for trailing-four-quarter MOB investment volume with $536 million, followed by South Florida with $512 million and Phoenix with $468 million.
• Average asking rent hit a record-high $25.23 per sq. ft. in Q4, up by 0.6% quarter-over-quarter and 0.8% yea-rover-year, while the overall vacancy rate fell slightly quarter-over-quarter to 9.8%.
• The MOB sector had 1.26 million sq. ft. of positive net absorption in Q4, its third consecutive quarter of positive demand, as construction completions remained below the five-year average.
• The 59 markets tracked by CBRE had a combined 2.7 million sq. ft. of MOB space under construction as of Q4, led by Phoenix, Dallas and Houston.