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What Healthcare Occupiers Should Know About The MOB Market

Saturday, October 31, 2026 23:43

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High occupancy, thin supply and a wave of new ownership are changing the leverage in medical office leases. Here’s what providers need to know before their next negotiation.

Medical outpatient buildings are in high demand right now. If you’re a healthcare provider searching for space, it’s important to understand what’s fueling this trend and how it should shape your next lease negotiation.

Two long-term tailwinds continue to support the MOB sector:

The ongoing shift to outpatient care
An aging population

Supply-demand fundamentals have also proven resilient through economic slowdowns, a combination that keeps attracting capital to medical office.

Occupancy is high, and it is not going anywhere.

MOB Occupancy, Completions & Net Absorption

MOB occupancy across the top 100 metros sat at 92.2% in 3Q 2026, flat from 1Q and up 10 basis points year over year. Renewal rates run above 80%. That stability is the product of tenants staying put, which means fewer blocks of quality space come back to market. When you need room to grow, you are competing for a shrinking set of options.

Demand is outrunning supply by more than two to one.

Ambulatory healthcare employment is growing about 2.4% a year. MOB inventory is growing about 1%.

New development is slowing. Construction starts fell to 17.5 million SF on a trailing 12 month basis, down from 19.3 million SF a year earlier. Completions dropped from 20.5 million SF to 15.9 million SF. From 2016 through 2022, new starts and deliveries added an average of 1.6% to inventory each year. As of 3Q 2026, deliveries over the past twelve months added just 1.0%, and starts represented only 1.1%.

High construction costs, and the rents needed to justify them, keep the pipeline thin. Limited new supply against steady demand keeps occupancy high. The space your practice needs in 2028 has to be identified and secured well before 2028.

Limited MOB Construction Keeps Vacancy Low

Acuity carries a premium, and you are paying it.

High-acuity MOBs averaged $30.51/SF in 3Q 2026 versus $25.59/SF for low-acuity buildings, a spread of nearly $5/SF.

There are now 7,558 MOBs with an ASC totaling 325 million SF, with square footage growing 3.0% per year since 2020. Specialties like GI, cardiology, orthopedics, ophthalmology, pain management, and ENT are driving that growth.

If your use includes procedures, expect landlords to price your space as a premium asset. Know what share of that rent reflects your own improvements before you agree to it.

MOBs with higher acuity Outperform on Rent

Your landlord is about to change.

Annual MOB transaction volume hit $17.6 billion as of 3Q 2026, up from $9.2 billion a year earlier. Private investors deployed $13.5 billion. REITs sold $8.6 billion and bought just over $1 billion. New owners arrive with new business plans: rent growth targets, tighter operating expense recovery, and less appetite for concessions.

A sale in your building changes the conversation at renewal. Read your lease for assignment, estoppel, and SNDA provisions now, not after the closing.

Your credit is a pricing tool. Use it.

The national MOB cap rate averaged 6.7%, steady after peaking above 7% in 2024 and 2025. The report notes cap rate compression specifically for Class A assets with strong health system credit tenancy.

Health system buyers averaged a 6.2% cap rate. Provider owners averaged 7.3%. That gap tells you exactly how much the market values a creditworthy tenant. Strong credit is leverage in lease economics, tenant improvement allowances, and sale-leaseback pricing. Too many occupiers hand that value to the owner for free.

Strategy has to start with local data.

Medical office occupancy has stayed above 92% for three years. Looking at the MOB markets in the following table, different pictures emerge regarding growth opportunities as well as current conditions.

Houston is the clearest example. The metro holds 47.0 million SF of MOB inventory at 88.3% occupancy, nearly 400 basis points below the national rate, with negative 205,440 SF of trailing net absorption, the weakest of the top 25.

Does this make Houston a tenant’s market? Not really, 88.3% occupancy isn’t particularly soft considering the majority of the vacancy is in older obsolete buildings or situated in less attractive mature submarkets. In addition, Houston is often the top market in terms of the volume of new MOB construction.

The negative 205K square feet of 12 month trailing net absorption is more about new supply and less about tenant demand. Don’t be surprised when the net absoprtion figures turn positive in the near-term. 1.5M square feet of new MOB space has been delivered over the last two quarters in the Houston MSA. The market is more nuanced than a figure on a market report.

Houston MOB Market Fundamentals

Medical Office Fundamentals in the Houston MSA

What occupiers should do now

Start renewal planning 24 to 36 months before expiration, not 12.
Benchmark rent against acuity-specific comps, not general MOB averages.
Treat any building sale as a trigger to review your lease position.
Quantify the value of your credit before you sit down with an owner.
Build your strategy on your metro’s data, not the national story.

The MOB sector’s reliability is exactly why investors want it. That same reliability is why occupiers who wait end up negotiating from the weakest position in the room.

Frequently Asked Questions

Why is it harder for healthcare providers to find medical office space in 2026?

Medical office occupancy across the top 100 U.S. metros held at 92.2% in 3Q 2026, and tenant renewal rates run above 80%. When most tenants stay put, few blocks of quality space come back to market. New supply isn’t filling the gap either. Ambulatory healthcare employment is growing about 2.4% a year while MOB inventory grows about 1%, and construction starts fell to 17.5 million SF on a trailing 12-month basis. Providers that need room to grow are competing for a shrinking pool of options, so renewal and expansion planning should start 24 to 36 months before lease expiration.

How much more do high-acuity medical office buildings cost to lease?

High-acuity MOBs averaged $30.51/SF in 3Q 2026, compared with $25.59/SF for low-acuity buildings, a premium of nearly $5/SF. Demand for procedure-capable space keeps rising: there are now 7,558 MOBs with an ambulatory surgery center, totaling 325 million SF, and that square footage has grown 3.0% per year since 2020. GI, cardiology, orthopedics, ophthalmology, pain management, and ENT are driving the growth. Providers with procedural uses should benchmark rent against acuity-specific comparables and know how much of the quoted rent reflects their own tenant improvements.

Is Houston a tenant’s market for medical office space?

Not really. Houston’s 47.0 million SF MOB market sits at 88.3% occupancy, nearly 400 basis points below the national rate, with negative 205,440 SF of trailing 12 month net absorption, the weakest of the top 25 metros. Those numbers overstate the softness. Most of Houston’s vacancy sits in older, obsolete buildings or in less attractive mature submarkets, and the negative absorption reflects heavy new supply rather than weak tenant demand. About 1.5 million SF of new MOB space delivered in the Houston MSA over the last two quarters. Quality space in strong submarkets remains competitive, and absorption is likely to turn positive in the near term.

The post What Healthcare Occupiers Should Know About The MOB Market appeared first on Coy Davidson – The Tenant Advisor.

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