### Medical Office Building Sector Expands with Outpatient Care Shift
A recent report from JLL, the *2025 Medical Outpatient Building Perspective*, identifies five key themes shaping the growth of the medical office building (MOB) sector. Here are the key findings:
#### **Outpatient Shift**
Health systems and corporate medical groups are prioritizing outpatient settings to support their inpatient strategies. The report highlights that finding the right location to serve patients and grow market share is a top priority.
#### **Rising Demand and Limited Construction**
The demand for MOBs continues to grow, driven by health systems, corporate medical groups, and independent providers. However, supply remains constrained due to high construction costs, increasing borrowing expenses, and volatile capital markets. The report notes that healthcare tenants, particularly those providing low- to mid-acuity care, are increasingly considering office and retail spaces near their target patient populations or close to hospital campuses.
#### **Growing NOI**
Despite a year-over-year decline in rent growth in 2024, rental rates at the high end of the MOB market have outpaced mid- and low-tier rents. Many tenants are opting to renew their leases, with JLL reporting an average lease term of 107 months for new agreements. This trend provides investors with steady increases. At the same time, rising tenant cost pressures may result in continued steady same-store MOB rent growth.
#### **Investor Stability**
The report highlights that the stability of MOB tenants and their tendency to renew leases make these properties an attractive asset class for investors. Nearly 50% of the 1.4 billion square feet of medical outpatient buildings are owned by health systems and healthcare providers. Looking ahead to 2025, investors will increasingly explore opportunities to repurpose existing office spaces for medical use to enhance property value.
#### **The Forecast**
Looking into 2025 and beyond, the report identifies several factors that will influence the MOB sector:
– An aging population, increasing disease prevalence, and the need for convenient healthcare services will drive demand.
– Challenges include the shift to home-based care and telehealth, workforce shortages, and slower population growth.
– Political administration changes and policy uncertainties are expected to create further shifts in the sector.
The MOB sector’s expansion aligns with the ongoing shift toward outpatient care, creating both opportunities and challenges for healthcare providers and investors alike.
