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Medical Office Buildings Keep Outperforming the Market in Rent and Price Per Square Foot

September 2021

Although Q2 sales volumes lagged previous years, prices per square foot and capitalization rates have held strong throughout the first half of 2021 due to investment-grade, credit-rated health systems.

The second quarter of 2021 saw $2.4 billion in sales volume in the medical office building (“MOB”) sales market across 92 transactions encompassing 273 properties, an H2C Securities Inc. (“H2C”) analysis shows.

MOB sales in the first half of 2021 decreased year over year, according to statistics from Real Capital Analytics (“RCA”). RCA's statistics indicate that MOB sales in the second quarter (Q2) of 2021 totaled $2.4 billion, a strong increase of about 50 percent over Q1, when sales totaled just $1.6 billion, but still putting the forecasted 2021 annual MOB sales volume below $10+ billion, breaking a six-year streak. Despite the slow start to the year, H2C expects sales volume to rebound, with a significant amount of portfolio activity anticipated toclose at the beginning of the second half of 2021 and projections of sellers entering the market before year end as the potential capital gains tax hike looms. 

MOB sales volume saw a similar trend at the start of the pandemic in early 2020, with quarterly sales for the first half of 2020 averaging $2.8 billion. By the end of the year, a strong Q4, with sales totaling $4.2 billion, capped off a year that recorded total volume of $11.1 billion. 

Although MOB fundamentals have remained strong, high demand and a bottleneck of supply has accelerated investors’ appetite for alternative healthcare real estate assets. Additional post-acute care assets such as inpatientrehabilitation hospitals, behavioral health hospitals, and others are now being looked, at with an abundance of dry powder capital waiting to be deployed in the market. While the core strategy of acquiring MOBs is at the center of healthcare real estate investments, with cap rates at historic all-time lows, longtime MOB investors are looking at other areas within healthcare real estate with opportunity for growth.

As the country emerges from the COVID-19 pandemic, health systems, which are the main drivers of healthcare real estate activity, are once again focusing on real estate opportunities and future development to grow their network. Despite initial fears that short-term pandemic-related losses would cause many healthcare providers to put capital improvements andexpansion on hold, health systems have been eager to increase hospital productivity, driven by an increased focus on upgrading or acquiring outpatient facilities. 

As highlighted in H2C’s Q12020 MOB Report, few asset classes have demonstrated the resiliency in values shown within the MOB sector. The MOB space’s momentum is expected to continue into the second half of 2021 as supply continues to lag demand and new entrants in the space seek additional exposure through acquisitions. Although cap rates could see some fluctuation should interest rates rise, one wouldn’t expect rising interest rates to diminish investor appetite for MOBs, whose valuations are more insulated from interest-rate risks.

Investment Sales and Trends

The largest transaction in the second quarter was Healthcare Realty Trust’s (NYSE: HRT) $116.5 million acquisition of a Class-A MOB in Poway, Calif. The 172,000-square- foot building at 15611 Pomerado Road known as Pomerado Hospital Outpatient Pavilion, is located on the Polomar Medical Center campus. The property was built in 2007 and features a variety of outpatient services, including diabetes clinic, a women's center/women's care, outpatient surgery center, and full- service imaging. It is 100 percent leased to Palomar Health and is the HRT’s fourth property in the San Diego market. The new master lease is projected to save the healthcare system more than $2 million annually in addition to providing immediate access to capital for tenant improvements to expand services in the building.

The largest portfolio transaction in the second quarter was completed by Healthpeak Properties, which acquired a 14-property MOB portfolio totaling 833,000 square feet across six states for $371 million, or $409 per square foot. The deal was “off-market,” and all facilities are on hospital campuses or in affiliated off-campus locations with investment-grade health systems.

Price Per Square Foot Quarterly Average Comparion Graph

Regional Review

The West region had the greatest transaction volume compared with other RCA-tracked regions at $661.5 million, $116.5 million of which was accredited to HRT’s purchase of Pomerado Hospital Outpatient Pavilion in Poway, Calif. Notably, Q2 saw a high fluctuation in cap rates across several regions as cap rates in the Mid-Atlantic and the Southeast increased by nearly 9 percent, settling at an average transaction cap rate of 6.8 percent. The Northeast saw the highest average price per square foot among all RCA-tracked regions, with an average price per square foot of $444.


Northeast Region


In June, Seavest Healthcare Properties purchased 902 Quintin Road in Brooklyn, N.Y. The 72,270-square-foot, eight- story property is anchored by NYU Langone and Touro College of Health Sciences. The property is located in a high traffic business and shopping district and designed with high ceilings and floor to ceiling windows. The $53.8 million purchase price equated to $744 per square foot.

In May, Remedy Medical Properties and its JV partner, Kayne Anderson Real Estate, acquired Andover Medical Center, located at 323 Lowell Street in Andover, Mass., for $55.2 million, or $769 per square foot. The property is a three-story, 71,800-square-foot MOB complex, built in 2014 and anchored by Pentucket Medical Associates.

Annual Transaction Volume Comparison Graph

In June, GI Partners acquired University City Science Center located at 3701 Market Street in Philadelphia, Pa. The property is a 141,913-square-foot MOB anchored by Penn Medicine, and it was bought for $79.5 million, or $560 per square foot, at a 4.6 percent capitalization rate. The building has many features, including incubator wet labs and business incubators for science and technology startups, and is located in a Keystone Opportunity Zone and Keystone Innovation Zone.

West Region

In April, Forward Time Corporation purchased Newport Harbor Medical Plaza, located at 330 Old Newport Boulevard in Newport Beach, Calif. The 29,991-square-foot building was recently developed in 2020 and is of $41 million equated to a sub-4.0 percent cap rate and $1,367 per square foot, marking the highest per-square-foot sale of the quarter.


In April, Healthpeak Properties acquired Northwest Specialty Clinics, located at 3355 Riverbend Drive in Springfield, Ore. The 122,000- square-foot, five-story MOB, completed in 2009, is considered the premier independent medical building in the area. It is situated next to PeaceHealth Hospital at Riverbend, which is the largest hospital between Portland and San Francisco. The asset is 81 percent leased with specialty surgical practices and contains high-value amenities, including a joint venture surgery center, imaging, and endoscopy suites. The Northwest Specialty Clinics building is connected to the surgery floor of the hospital, providing access for surgeons and patients. The purchase price of $42.2 million equated to $346 per square foot.


In June, Sutter Health purchased 1720 El Camino Real, a 106,018-square-foot MOB located in Burlingame, Calif. The sale represented a rare opportunity to acquire a Class-A MOB in the severely supply constrained San Francisco Peninsula market. The property sits immediately adjacent to the 241-bed, acute care Sutter Health Mills-Peninsula Medical Center, a hospital that serves 3.6 million people in the region. The purchase price of $64.4 million equated to $607 per square foot.

Cap Rates Quarterly Average Comparison Graph

Southwest Region

In June, NexCore purchased Hillcroft Medical Clinic in Sugar Land, Texas. The 40,770-square-foot portfolio is anchored by Hillcroft Medical Clinic Association, which offers 14 specialties and an on-site, state-of- the-art radiology center. The Property is well-located in Sugar Land, with convenient access to Houston Methodist Sugar Land Hospital and St. Luke’s Health Sugar Land Hospital, where many of the HMCA physicians have admitting privileges. The $14.7 million purchase price equated to $360 per square foot at a 5.3 percent cap rate.

In April, Remedy Medical Properties acquired a 21,575-square-foot MOB in Reno, Nev. In purchasing the Urology Nevada facility at 5560 Kietzke Lane with joint venture partner Kayne Anderson Real Estate, Remedy paid $12.3 million, or $570 per square foot. The MOB is undergoing an 8,425-square-foot expansion to add two operating rooms, a radiology vault, and imaging suites.

Midwest Region

In April, Healthpeak Properties acquired 1000 West 140th Street located in Burnsville, Minn. The 85,600-square-foot MOB is fully occupied by Twin Cities Orthopedics, which has 30 locations across Minneapolis and western Wisconsin. The purchase price of $52.0 million equated to $607 per square foot.

In May, Milwaukee Lexington Properties acquired the Aurora Health Care MOB, located at 7800 N 113th Street in Milwaukee, Wis. The 80,569-square-foot MOB is fully leased to Aurora Health Care (Aa3/AA/NR) and is located six miles from Froedtert Menomonee Falls Hospital, with 202 inpatient beds. The purchase price of $19.7 million equated to $245 per square foot.


In May, Montecito Medical Real Estate acquired Beachwood Medical Center, a 69,800-square-foot, state- of-the-art surgical hospital in Beachwood, Ohio, for $58.3 million. The facility has a 25-bed, eight operating-room facility and is fully leased to an entity owned by local health systems Lake Health and University Hospitals. The hospital has a medical staff of more than 200, including 56 operating physicians.

Average Price Per Square Foot Regional Comparison Graph



In June, Montecito Medical purchased Brookfield Commons, located at 6600 W Broad Street in Richmond, Va. The 91,186-square-foot MOB, built in 1977 and recently renovated in 2019, is anchored by Pulmonary Associates of Richmond and Priva Women’s Health. The property is located less than two miles away from Henrico Doctor’s Hospital. The $32.5 million purchase price equated to $359 per square foot.

In May, Welltower purchased a mixed-use, healthcare-focused project in Charlotte, N.C. The facilities comprise the 176,640- square-foot Atrium Health Charlotte MOB I and the 104,508 square foot Atrium Health Charlotte MOB II. Welltower will remain strategic partners in future developments on the nine-acre mixed-use campus. The $131.1 million purchase price equated to $466 per square foot.


In April, Columbia Property Investors acquired Durham Medical Center, located at 4220 N Roxboro St. in Durham, N.C. The 25,408-square- foot two-story MOB is located half a mile from the Duke Regional Hospital, a 369-bed acute care facility. The property is 100 percent leased to Duke Health (Aa2/AA/NR), a three-hospital system with over 22,000 employees, 1,200 physicians, and over 68,800 admissions per year. The $6 million purchase equated to $237 per square foot.

Physicians Realty Trust acquired AdventHealth Wesley Chapel MOB. located at 2590 Healing Way in Wesley Chapel, Fla. The 96,768- square-foot MOB was completed in 2021 is fully leased to AdventHealth (NR/A/A+) Medical Group. The facility is also located on AdventHealth’s Wesley Chapel Campus Heart of Florida Medical Center, with a total of 145 inpatient beds. The $35.3 million purchase equated to $365 per square foot.

In June, AW Property Co. acquired an off-market portfolio of 13 MOBs located throughout Eastern Tennessee and Southwestern Virginia. The 410,000-square-foot portfolio was acquired for $67.5 million from Healthcare Trust of America (NYSE: HTA). The portfolio is aligned with hospitals operated by the dominant regional provider, investment-grade-rated Ballad Health (S&P: A-, 21 hospitals), and the leading multi-specialty physician group, Holston Medical Group (45 locations, 1,000+ employees). Ten of the buildings are located on or adjacent to hospital campuses, while the remaining three are within suburban locations.

About H2C Securities Inc.

H2C is a strategic advisory and investment banking firm committed to providing superior advice to healthcare organizations and related companies throughout the United States. H2C’s professionals have a long track record of success in healthcare mergers and acquisitions, capital markets, real estate, and restructuring transactions, acting as lead advisors on hundreds of transactions representing billions of dollars in value. 

Securities and services offered through H2C Securities Inc., member FINRA/SIPC, a registered broker-dealer and an indirect subsidiary of Fifth Third Bank, National Association. All rights reserved. Securities and services offered through H2C Securities Inc.: Are Not FDIC Insured; Offer No Bank Guarantee; May Lose Value; Are Not Insured by any Federal Government Agency; Are Not a Deposit. 

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Real Estate Banking Practice

For more than 20 years, the real estate investment banking professionals at H2C have successfully served as advisors on real estate transactions in excess of $12.5 billion nationwide. For more information on our real estate advisory group, please contact one of the following H2C professionals or visit our website at

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