The stars are aligned for a healthy new year in 2025 as vital signs for the medical outpatient building sector appear to be improving. Lower vacancy rates, higher rents, more leasing activity, increased absorption, and a 48% uptick in annual sales volume are all showing up on corporate monitors, according to CBRE’s 2025 U.S. Healthcare Real Estate Outlook.
Leading the way in new MOB construction in 2Q 2024 was New York City, where 926,643 square feet was already underway. And CBRE expects the trend to continue in the future.
Five sites in NYC’s Upper East Side and Brooklyn are seeing the most new construction in the city. “Manhattan’s Upper East Side will continue to be a hot spot given the area is home to campuses belonging to major hospitals such as Hospital for Special Surgery, Mount Sinai, NY-Presbyterian/Weill Cornell, Memorial Sloan Kettering and Rockefeller University,” said Bill Hartman, CBRE vice chairman.
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The growing share of Tri-State residents over 75 who are likely to need care is a primary cause of the growing need for new service delivery locations. Another factor is that top medical centers, research facilities and academic hospitals in Manhattan are now providing more ambulatory services outside their main campuses – a development enabled by advanced technologies that minimize the need for hospital stays.
Other cities experiencing high levels of MOB construction are Washington, DC (760,000 square feet) (669,000 square feet) Philadelphia (592,000 square feet) and Indianapolis (589,000 square feet). Rounding out the top 10 are Houston, Central New Jersey, Phoenix, Orlando, and Detroit.
“CBRE defines the MOB sector as buildings constructed for or renovated to house patient care outside of hospitals,” the report noted. “This includes facilities for primary care physicians, dentists, behavioral clinics, and other medical specialists. Urgent care centers, surgery centers, and addiction treatment clinics are also included.”
Absorption is also solid in many markets. In 2025, CBRE projects that Houston will be overtaken by Boston in terms of net absorption. Boston is expected to lead the nation with 808,000 square feet absorbed, followed by Houston (687,000), Dallas (595,000), Washington, DC (554,000), and Chicago (514,000). Projected runners-up are Orlando, Detroit, St. Louis, Atlanta, and Tampa.
All this bodes well for developers and owners. CBRE foresees that asking rents will rise by up to 1.8% in both 2025 and 2026 and vacancy will drop from 9.57% to 9.46% by the end of 2025. Other hopeful prospects it expects are growing healthcare employment, declining vacancy and rising rents.
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