LOS ANGELES—At a national average of 8% as of the first quarter of this year, medical office building vacancies come in considerably lower than the 13% average for the US office sector as a whole, says a new report from CBRE. Furthermore, the decline in vacancies has accelerated over the past nine quarters, and MOB absorption has outpaced new additions to supply over the past seven years.

An aging US population—with the ranks of seniors expected to more than double to 92 million by 2055–pressure for healthcare providers to cut costs and new technologies all have driven growth. “The steep increase in the 65+ population and anticipated greater need for in-office physician services by this group signals a continued increase in demand for healthcare services and medical office space in the years ahead,” says Andrea Cross, CBRE's Americas head of office research.

Accordingly, investor interest in the sector has risen dramatically since 2010, with annual sales of medical office properties totaling 10,000 square feet or more increasing from just under $4 billion in '10 to $10.2 billion in 2016, CBRE says. Cap rates have come in by 150 basis points over the past seven years, decreasing from a high of 8.3% in mid'-'10 to 6.8% as of Q1 2017.