Investors are catching on to one of the most resilient niche asset classes - medical outpatient buildings.

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The Understated Surge in Medical Office Buildings: Understanding a $400 Billion Corner of CRE

For years, mainstream commercial real estate headlines have revolved around industrial mega-developments, luxury multifamily towers, and experiential retail concepts. Meanwhile, an entirely different asset class—one without the glossy marketing or architectural flair—has quietly built one of the most dependable track records in the industry.

I’m talking about Medical Office Buildings or Medical Outpatient Buildings (both MOB for short).

These properties rarely make the cover of real estate magazines. Many look like standard suburban offices or modest brick clinics tucked along commuter corridors. But inside those walls, healthcare providers deliver some of the most essential, steady, and economically resilient services in the U.S. economy.

Today, MOBs represent an investable universe exceeding $400 billion, and more capital—from institutions, family offices, and private investors—is noticing what’s been hiding in plain sight: stable tenants, long leases, and demand curves untouched by remote work or discretionary spending cycles.

Below, we explore what MOBs actually are, why they’re thriving in today’s environment, and how investors are repositioning around one of the most durable income streams in commercial real estate.

What Exactly Is a Medical Office Building?

At first glance, a medical office may resemble a typical office building. But the similarities stop at curb appeal. MOBs are purpose-built (or heavily retrofitted) to support healthcare delivery—something traditional office buildings can’t handle without major investment.

A typical MOB houses tenants such as:

• Outpatient clinics

• Primary care doctors

• Specialist groups (orthopedic, dermatology, cardiology, GI)

• Dental practices

• Imaging centers

• Ambulatory surgical centers

• Urgent care operators

Where a conventional office suite might need modest wiring and a conference room, medical providers need:

• Heavy-duty HVAC to maintain air quality

• Additional plumbing for sinks in exam rooms

• Lead-lined spaces for imaging

• Specialized power loads

• ADA-compliant access and patient-friendly layouts

This leads to two major advantages for landlords: higher tenant investment and lower tenant mobility.

Why MOB Tenants Stay Longer

Medical practices sink significant capital into their buildouts. They also operate under regulations—HIPAA, ADA, OSHA, and state-specific healthcare rules—that make relocation expensive and operationally disruptive.

Because of this:

• Renewal rates are meaningfully higher than standard office

• Lease terms skew long (often 7–15 years)

• Practices typically prefer stability to churn

For investors, that means fewer surprises and smoother cash flow.

Who Owns MOBs Today?

Ownership spans a surprisingly diverse spectrum:

• Healthcare REITs controlling large, hospital-adjacent portfolios

• Institutional funds acquiring stabilized suburban assets

• Family offices using MOBs for multigenerational income planning

• Private investors and syndicators entering via NNN deals or mid-market properties

This is one of the few CRE categories where both billion-dollar institutions and individual investors can operate in the same playground—but not necessarily chase the same deals.

Why MOBs Are Accelerating in 2025 and Beyond

While many property sectors wrestle with new demand realities—office downsizing, retail normalization, and rising cost of capital—MOBs continue to move counter to the cycle. Their secular tailwinds are strengthening, not weakening.

Here’s why.

1. Demographics Are Inevitable—and Supportive

By 2030, Americans over 65 will make up 20% of the population. Older adults require more frequent medical care, more specialty visits, and more ongoing management of chronic conditions.

This translates into:

• More outpatient visits

• More physical therapy and rehab demand

• More diagnostics and imaging

• Increased need for neighborhood-accessible care

Healthcare follows population—and the population is aging.

2. Outpatient Care Is the New Center of Gravity

Hospitals are expensive to operate and overcrowded. As a result, health systems and private practices have spent years shifting services away from hospital campuses into lower-cost outpatient settings.

You’re now seeing:

• More same-day procedure centers

• More specialty clinics in suburban retail corridors

• More decentralized care hubs closer to where patients live

This diffusion of care delivery is one of the biggest structural shifts in American healthcare—and MOBs are the real estate backbone of that shift.

3. Tenant Stickiness Creates Predictable Cash Flow

Healthcare providers seldom move once established, thanks to:

• High capital investment

• Sensitive patient relationships

• Insurance-network geography requirements

• Regulatory hurdles

This “stickiness” produces:

• Long-term leases with fixed annual escalations

• Renewals at high frequencies

• Minimal downtime between tenants

In a high-rate environment, predictability is a premium asset.

4. NNN and Passive-Friendly Leases Are Common

Many medical practices operate under:

• NNN leases, pushing taxes, insurance, and maintenance to the tenant

• Modified gross structures with controllable pass-throughs

• Annual rent bumps, typically 2–3%

This lowers operational friction for owners while providing inflation-aligned income.

Why Investors Are Suddenly Paying Attention

MOBs used to be considered a niche sub-sector—too complex for generalist investors and too small-scale for many institutions. But the story has changed.

1. Income Stability Beats Market Volatility

Investors want assets that perform regardless of macro conditions. MOBs have delivered:

• High rent-collection rates

• Consistent occupancy

• Steady NOI growth

Even pandemic-era disruptions barely dented the sector.

2. They Outperformed During Downturns

COVID put every asset class on trial. Retail struggled. Office occupancy cratered. Medical providers, designated as essential, stayed open. Some MOBs actually saw increased patient volume.

This reinforced a key insight: healthcare demand doesn’t go on pause.

3. Everyone from REITs to 1031 Buyers Is Entering the Arena

Capital is flowing from all directions:

• Public REITs scaling outpatient portfolios

• Private equity aggregating suburban MOB clusters

• Family offices seeking durable, tax-efficient income

• Individual investors buying NNN-leased clinics

As more players enter, valuations increase—but so does market validation.

4. Entry Points Are More Accessible Than Ever

You no longer need to write a $50M check to participate. Today’s landscape includes:

• Sub-$5M local MOBs

• Net-leased urgent care or dental anchors

• Syndicated offerings

• DST programs

• Co-investment vehicles

This democratization is pulling more private wealth into the sector than ever before.

What Defines a Strong MOB Investment?

Not all MOBs are created equal. Here’s how experienced investors separate winners from headaches.

1. Location That Serves Patient Behavior

Historically, the conventional wisdom was “be near a hospital.” That still matters—but emerging demand is concentrated in:

• Dense suburban neighborhoods

• Retail corridors with high visibility

• Communities with aging populations

• High-growth regions lacking hospital capacity

The modern patient wants convenience, not a campus.

2. Tenants Who Provide Essential, Recurring Care

The most durable practices share three traits:

• Their services are needs-based, not discretionary

• They produce steady patient throughput

• They rely on proximity to patients

Ideal tenants include:

• Primary care

• Dental

• Imaging

• Dermatology

• Urgent care

• Behavioral health

• Physical therapy

Group practices or health-system affiliates offer added credit strength.

3. Buildout Quality and Capital Investment

A tenant who invests $500K in plumbing, imaging, HVAC, and exam rooms isn’t leaving without a compelling reason. Look for:

• Sophisticated electrical infrastructure

• Exam-room density

• Specialized treatment rooms

• Modern ADA access and mechanical systems

This is one of the core drivers of tenant longevity.

4. Leases That Create Predictable, Upside-Protected Income

A great MOB lease typically includes:

• Long initial terms

• 2–3% annual escalations

• NNN or modified gross economics

• Renewal options with clear structures

• Personal or corporate guarantees when possible

Among passive-income investors, this is the holy grail.

5. Intangibles That Compound Value

The best MOBs often share softer factors such as:

• Complementary tenant mix (e.g., orthopedics + PT + imaging)

• Alignment with insurance-network geography

• Strong referral ecosystems

• Clear visibility and easy parking

These may not show up on a rent roll but deeply influence performance.

Understanding the Risks (and How to Mitigate Them)

Even with its strengths, the MOB category has challenges. Smart investors manage them upfront.

1. Specialized Buildouts Can Cut Both Ways

A deeply customized space is great—until a tenant leaves.

Mitigation:

• Favor floor plans adaptable for multiple medical uses

• Prioritize multi-tenant buildings over single-tenant bets

• Underwrite downtime conservatively

• Negotiate TI responsibilities wisely

2. Regulatory Complexity Requires Expert Guidance

Medical real estate must align with zoning, ADA, HIPAA logistics, and state-specific healthcare codes.

Mitigation:

• Engage healthcare-focused brokers and attorneys

• Verify zoning allows medical use by-right

• Validate compliance before closing

3. Liquidity Varies by Market

MOBs are less liquid than apartments or industrial.

Mitigation:

• Buy in growth corridors

• Maintain clean financial reporting

• Favor NNN leases attractive to 1031 buyers

4. Rising Demand Can Lead to Overpaying

When capital concentrates, pricing tightens.

Mitigation:

• Stay disciplined on replacement cost thresholds

• Stress-test rollover scenarios

• Avoid banking on cap-rate compression

Conclusion: Why MOBs Are Becoming a Core CRE Strategy

Medical Office Buildings aren’t a hidden sector anymore—they’re a rediscovered one. As demographics shift, outpatient care expands, and investors chase durable income streams, MOBs sit at the intersection of necessity and stability.

They offer:

• Recession-resistant demand

• Long-term leases with built-in growth

• Predictable, low-volatility cash flow

• Multiple entry points for both institutions and individuals

In a world where many property types are redefining their place in the economy, MOBs have never been clearer in purpose or stronger in fundamentals.

For investors looking to diversify, secure stable income, complete a 1031 exchange, or build a portfolio with long-term durability, MOBs deserve a serious look. This is one corner of commercial real estate where quiet reliability may end up being the strongest competitive advantage.

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