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Record Low Number of Buildings Trade as Seller/Buyer Expectations Look to Sync: Are We Nearing the Bottom?

First half data shows a sizable drop in transaction volume, but valuations show steadiness.

August 2023


In the second quarter of 2023, sales volume of medical office buildings ("MOB") amounted to $2.2 billion. While higher than last quarter’s $1.7 billion, the first half of 2023 sales volume of 3.9 billion is 40 percent below the average of first-half MOB transaction volume since 2018. The activity is a stark contrast to the robust sales volume witnessed in prior years and the second quarter saw the lowest number of buildings transacted since 2014, with only 225 properties exchanged. This figure represents a drop from the first quarter’s 255 properties, and about half of the number of properties sold in the second quarter of 2022.

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Source: Based on an H2C analysis of industry data from RCAnalytics.

Cap rates moderately decreased to 6.8 percent, an increase of 50-60 basis points higher than 2022 averages but 30 bps lower than where Q1 finished. The trailing 12-month average MOB cap rate is 6.5 percent, a 50 basis point difference from trailing 12-month cap rates in the second quarter in 2022. Despite the limited sales activity, the underlying fundamentals of MOBs remain strong and the downtrend in sales activity is primarily a result of challenges in the debt capital markets.

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Source: Based on an H2C analysis of industry data from RCAnalytics.

Securing favorable debt has proven to be challenging due to the impact of higher interest rates caused by ten consecutive increases in the federal funds rate (with an eleventh increase following the quarter's end). Additionally, lenders have exercised increased caution in response to the recent bank failures. However, towards the end of the quarter, there are positive signs as the debt market begins to stabilize.

The rate hikes this year have been moderate, each being 25 basis points, which is a significant departure from the more pronounced hikes of 2022 (four at 75 basis points and two at 50 basis points). Furthermore, inflation appears to be tempering, with consumer prices increasing 3.0 percent in June, the lowest increase since March 2021.

Amidst the current market turbulence, an opportunity presents itself to buyers to acquire MOBs at pricing levels that have not been seen in years. H2C anticipates that buyers who have the capability to make all-cash offers will gain a considerable advantage due to decreased competition as others wait for the debt markets to stabilize. Moreover, value-add MOBs provide the potential to offset the diminished spread between cap rates and interest rates by generating increased yields through lease up and rate growth. 

Looking ahead to the second half of the year, H2C anticipates that institutional investors, who were previously interested in entering the market but refrained due to peak pricing, will now reconsider their stance as pricing softens. The increased infusion of capital into the sector, combined with limited supply, should help the MOB sector continue to outperform other asset classes. 

Over the past few years, a significant portion of sales volume has been attributed to portfolio transactions, primarily due to the influx of additional capital into the sector seeking scale and leveraging with low interest rates. However, in the most recent quarter, we observed a decline in portfolio activity, particularly pertaining to transactions involving more than five buildings or above $50.0 million in purchase price. Instead, a majority of the activity observed during this period involved individual property transactions.

It is expected that health systems may make up a larger percent of sellers in the second half of 2023 as they look to bolster cash positions by monetizing their real estate holdings. 

Source: Based on an H2C analysis of industry data from RCAnalytics, US Bureau of Labor Statistics.

Investment Sales Trends

The largest portfolio to close in the second quarter was the conclusion of a 19-property blood plasma portfolio that closed in five tranches and led by H2C. The 242,000 square foot portfolio spans across 13 states and are all leased to ImmunoTek, the leading independent blood plasma collection and development company in the United States. The portfolio was acquired by a publicly traded REIT that primarily invests in properties owned under long-term net leases for $136.7 million.

During the second quarter, the largest transaction in terms of dollar amount was a single asset acquisition completed by Boyd Watterson. The Ohio-based firm purchased a 273,000-square-foot Veterans Affairs Outpatient Clinic in Austin, Texas for $142.0 million which equates to $520 per square foot. The building, which was a built-to-suite for the U.S. Department of Veterans Affairs VA (-/AA/-) (1) in 2013, offers services including physical therapy, mental health counseling, radiation treatments, prosthetic replacements, cardiology and neurology.

Regional Review

In the second quarter, the West led other regions with $523.0 million in sales, followed closely by the Southeast with $502.4 million. Combined, these two regions represented nearly half of the total volume for the quarter. Additionally, the Northeast and Southwest saw transaction volumes exceed $420.0 million, while the Mid-Atlantic and Midwest regions had the lowest volume, both under $185.0 million. The West region recorded both the lowest cap rate and highest per square foot metrics at 5.9 percent and $507 per square foot.

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Source: Based on an H2C analysis of industry data from RCAnalytics.

Northeast Region

In a transaction led by H2C, New Jersey-based Atkins Companies acquired a 490,000-square-foot-MOB in Chappaqua, New York for $40.0 million. The property originally served as the Global Headquarters for Reader’s Digest and was redeveloped for medical office.  Located directly off Saw Mill River Parkway, the MOB is anchored by Northern Westchester Hospital which is part of Northwell Health (A3/A-/A-) (1) and CareMount Medical and features 12 additional tenants.

In June, Remedy Medical Properties acquired a two-story, 64,000-square-foot MOB in Dedham, Massachusetts, for $41.9 million or $655 per square foot. Built in 1964 and renovated in 2013, the MOB sits on approximately five acres with direct access to I-95. The property is 94 percent occupied by New England Baptist Hospital which is part of Beth Israel Lahey Health (A3/A/−) (1).  Services at the facility include sports medicine and orthopedic surgery, which encompass offerings such as outpatient surgical procedures, pain management, rehabilitative services and imaging.

Also, in June, Montecito Medical entered the New Jersey market with the acquisition of two MOBs.  Located in the neighborhoods of Livingston and Providence, the combined portfolio spans 131,000 square feet and sold for $40.5 million, or $309 per square foot. The facilities are fully leased to Summit Health which was recently acquired by Walgreens’ (Baa3/BBB/BBB-) (1) VillageMD. Services provided at the clinics include general pediatrics, neurology, dermatology, endocrinology, ophthalmology, plastic surgery, radiology, gynecology and behavioral services. 

Mid-Atlantic Region

In a transaction led by H2C, Centra Health (Baa1/A-/A) (1) monetized a 48,000-square-foot MOB in Danville, Virginia. The acquirer was a Midwest-based healthcare real estate investment firm. The two-story building was completed in 2016 and houses a variety of Centra Health services including primary care, urgent care and radiology. Centra Health, a regional not-for-profit health care system based in Lynchburg, Virginia, leased back 57% of the property as part of the transaction.

Additionally, in May, Montecito Medical acquired a 209,000-square-foot MOB in Roanoke, Virginia, for $21.6 million or $103 per square foot. Located within an 800,000-square-foot mixed-use center, the two-story building is 100% occupied by Carillion Children’s Clinic which offers various medical services, including physical exams, behavioral health, nutrition counseling and treatment of acute illnesses, injuries and recurrent health conditions, among others. Carilion Clinic (Aa3/AA-/−) (1) is a not-for-profit system serving nearly one million Virginians and West Virginians across its nine hospitals.

West Region

In May, California-based Uninational Corporation purchased a 68,000-square-foot MOB in Long Beach for $29.0 million. The four-story, multi-tenant building is adjacent to MemorialCare’s (−/AA-/AA-) (1) Long Beach campus which houses both the 453-bed Long Beach Medical Center and 357-bed Miller Children’s and Women’s Hospital.  The property is anchored by The Children’s Clinic Family Health which occupies about 27 percent of the building. There are 14 other tenants providing various clinical medical services, including general medicine, urgent care, obstetrics/gynecology, urology, neurology, on-site surgery and imaging.

Additionally, in May, Fresno Supreme Inc. acquired a 39,000-square-foot MOB and outpatient surgical center in Fresno, California for $13.9 million. Located adjacent to the 169-bed Kaiser Permanente (−/AA-/ AA-) (1) Fresno Medical Center, the three-story building was constructed in 1993 and sits on nearly two acres. The property is fully leased to nine tenants offering a variety of medical uses such as endoscopy, oral surgery, dentistry, orthodontics and dermatology. 

Southwest Region

In April, a joint-venture between Chicago-based Remedy Medical Properties and Boca Raton-based Kayne Anderson Real Estate acquired two properties in the Englewood submarket of Denver, Colorado. The properties, spanning 68,000 square feet, are adjacent to each other and are fully leased by six tenants. The portfolio's primary use is surgical, featuring an ambulatory surgery center leased to Orthopedic Centers of Colorado in partnership with SCA Health (owned by UnitedHealth Group - A2/A/A) (1), as well as a bariatric surgery tenant affiliated with HealthOne, a leading health system in the Denver metro area. Other specialties offered at the facilities include imaging, spine, orthopedics, anesthesia, and dermatology.

Also in April, Dallas-based MedProperties Realty Advisors acquired a 52,000-square-foot kidney care center in South Salt Lake, Utah for $28.3 million. Built in 2018, the Class A, 97 percent leased Wasatch Renal Center is predominately occupied by a group of tenants affiliated with Fresenius Medical Care (Baa3/BBB-/BBB-) (1), a global leader in kidney disease research and treatment.  Services at the building include a clinic, dialysis center, imaging center and an ambulatory surgery center focused on vascular care.

Additionally, in May, Lincoln Property Company in partnership with Virtus Real Estate Capital, acquired an 82,000-square-foot MOB in Southlake, Texas. Built in 2012, the four-story building is situated along State Highway 114 on the campus of Methodist Southlake Hospital (54 beds). The building benefits from increased connectivity as it is physically linked to the hospital via a two-story enclosed corridor. 

Midwest Region


In April, an Ohio-based family office purchased a five-property portfolio located in the Leawood, Independence and Northland submarkets of Kansas City for $20.6 million. The portfolio totaled 77,000 square feet and was 90% occupied on a long-term triple net basis. The portfolio includes an urgent care facility and two properties fully leased to a private equity-backed ophthalmology practice, Sabates Eye Centers. 

Additionally, in June, California-based Four Corners Property Trust (NYSE: FCPT) acquired a portfolio of five properties totaling 44,600 square feet located throughout Illinois and Indiana for $24.3 million.  All properties were net-leased to Oak Street Health, a national provider of primary care services with 169 healthcare facilities across 21 states that was recently acquired by CVS Health Corp (NYSE:CVS) for $10.6 billion. All five properties were located within an hour’s drive of Oak Street Health’s Chicago Headquarters. The buyer, Four Corners Property Trust, is a real estate investment trust that primarily acquires high-quality, net-leased restaurant and retail properties.

Southeast Region

In May, Boston-based Fidelity Investments acquired a 60,000-square-foot medical office property within the Research Triangle Park submarket in Durham, North Carolina for $20.7 million. Built in1986 and renovated in 2011, the three-story MOB sits on five acres of land with direct access to I-40. The building is 100% occupied by Duke Health (Aa3/AA/AA-) (1), a world-class academic and health care system. The property houses multiple Duke Health clinics with a focus on Children’s and Pediatric care. 

Additionally, in May, Milwaukee-based Physician’s Realty Trust (NYSE: DOC) completed the acquisition of an 80,000-square-foot MOB in Birmingham, Alabama, for $28.0 million. Built in 2012, the three-story building is anchored (~90%) by Cardiovascular Associates, one of the largest cardiovascular practices in the country and affiliated with Brookwood Baptist Health which is owned by Tenet Healthcare (B1/B+/B+) (1). The site sits on over four acres of land located conveniently off I-459 and HWY 280.

1. Health system credit rating (Moody’s/S&P/Fitch)

About H2C Securities Inc. ("H2C")

H2C is a strategic advisory and investment banking firm committed to providing superior advice to healthcare organizations, higher education institutions, andrelated companies throughout the United States. H2C’s professionals have a long track record of success in healthcare and higher education mergers and acquisitions, capital markets, and real estate 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 $17 billion nationwide. For more information on our real estate advisory group, please contact one of the following H2C professionals, or visit our website at

Philip J. Camp

Managing Director


Michael E. Fioravanti

Vice President


Nathan Choi



Matthew T. Tarpley

Executive Director


Jake D. Gorin

Senior Associate


Ravi H. Patel



Kyle Hopkins



Sean P. Karl



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