Asset Class
Medical office buildings are the breakout performer in commercial real estate -- behaving like needs-based healthcare infrastructure rather than discretionary office space. MOBs with strong health system tenancy and durable occupancy fundamentals represent a compelling asset class for both debt and equity capital.
Market Overview
Medical outpatient buildings have separated from traditional office fundamentals. MOB occupancy reached 92.3% by year-end 2025 compared to 80.2% for conventional office, while MOB rents rose 6.2% versus a 3.4% decline in office rents over 2023-2025. Cap rates compressed from 7.47% at end of 2024 to 6.49% at end of 2025, signaling strong institutional demand.
The demand drivers for medical office are structural rather than cyclical. An aging population, the shift from inpatient to outpatient care, and health system expansion into community-based settings all support long-term occupancy. Healthcare job postings in medical and social assistance rose from 88,630 in mid-2020 to 205,437 by mid-2025, tracking service expansion.
Annual MOB transaction volume grew from $29B in 2016 to $154B in 2025 according to Avison Young, reflecting a decade-long repricing of the asset class. Private buyers led acquisitions in 2025 at 51.1%, followed by listed REITs at 26.3%. Lower interest rates and improved sentiment are fueling continued market momentum heading into 2026.
Our Approach
H Equities recognizes medical office as a standout asset class with durable fundamentals and needs-based demand. Our approach focuses on MOBs with strong health system tenancy, proximity to hospitals and population centers, and demographic tailwinds that support long-term occupancy.
Financing Options
Senior bridge loans for MOB acquisitions and recapitalizations. We underwrite to tenant credit, lease structure, and healthcare demand fundamentals.
Learn more →Entity-level preferred equity for medical office investments. Provides additional leverage for sponsors acquiring or recapitalizing MOB portfolios.
Learn more →General partner co-investment alongside experienced healthcare real estate operators. We bring capital stack and structuring expertise to MOB partnerships.
Learn more →Key Considerations
Tenant credit matters enormously: the spread between a hospital-affiliated health system lease and a small specialty practice lease can be enormous in terms of risk.
Evaluate reimbursement and policy exposure -- healthcare economics run through Medicare/Medicaid dynamics and insurer negotiations that can impact tenant stability.
MOB deliveries have remained relatively stable (-5.3%) compared to a 54.1% drop in traditional office deliveries, but pockets of overbuilding exist in certain markets.
Assess proximity to hospitals, major medical centers, and population density -- these fundamentals drive patient volume and tenant demand.
Lease structures in medical office often include higher tenant improvement allowances due to specialized build-out requirements for clinical use.
FAQ
MOBs have fundamentally different demand drivers than traditional office. With 92.3% occupancy versus 80.2% for conventional office, and 6.2% rent growth versus a 3.4% decline, the asset class behaves more like healthcare infrastructure than discretionary office space.
Structural demand drivers -- an aging population, the shift to outpatient care, and health system expansion -- support durable occupancy. Cap rate compression from 7.47% to 6.49% over the past year signals growing institutional demand.
Bridge loans, preferred equity, and co-GP equity are all applicable to medical office investments. Product selection depends on the capital structure and the sponsor's role in the deal.
Health system tenancy, lease credit quality, proximity to hospitals and population centers, and markets with strong healthcare employment growth are the primary underwriting criteria.
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