Demand for medical office space has mostly normalized, with investors pouring capital into the asset class in what some experts are calling a defensive strategy.

"While some people continue to practice caution amid the emergence of new COVID-19 variants, ultimately many of these appointments must be fulfilled," Marcus & Millichap's Alan Pontius writes in a new report. "All the while, the population is aging, which brings along certain medical realities. These factors together underpin the current strong tenant demand for medical offices."

While traditional offices saw a major rise in vacancy at the onset of the pandemic, medical office vacancy rose just 80 basis points to 9.5% in 2020.  Availability tightened at the tail end of 2020, which drove the average asking rental rate up to $22 per square foot, an increase of nearly 4% from the end of 2019.  Asking rents were highest in San Francisco, followed by New York City, Los Angeles, San Jose, Miami-Dade, Oakland, San Diego, Orange County, Seattle-Tacoma, and Washington, D.C.