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Q3 MOB Report

Health Systems Leverage Third-Party Developer Capital to Create State-of-the-Art Facilities, Fulfilling Medical Office Building Demand

November 2021

Although Q3 sales volumes nearly doubled year-to date total sales volume, the vast amount of health system MOB development highlights the unmet demand for modern medical office spaces.


The third quarter of 2021 saw a 73 percent year-over-year increase in total medical office building (”MOB”) sales volume, which encompassed 355 properties valued at an aggregate $3.7 billion, an analysis by H2C Securities Inc. (“H2C”) shows (1).

Medical Office Building Sales, Volume, Total, 2003-2021

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

With wide-ranging investor demand to acquire MOBs, strong development numbers will sustain higher prices per square foot and sales volumes in the future. The latest wave of construction projects is the result of several factors: a strong economy, a relatively low- interest-rate environment, and growing competition among healthcare providers to retain current and attract new patients. Such competition has resulted in the delivery of outpatient services in technologically advanced facilities that are situated in retail-like locations. Additionally, proximity to hospitals continues to be a major driver of MOB projects, whether they are on- or off-campus facilities. According to Revista’s most recent data (2), 378 MOB projects were started or completed through Q3 2021.

While the number of MOBs started or completed during 2020 fell by about 9.7 percent compared with 2019 (3) , the current number of healthcare real estate development projects in 2021 remains quite healthy. Additionally, there has been a significant uptick in third-party healthcare real estate development projects, comprising 42 percent of current developments, an H2C analysis shows (4). This suggests that health systems and other providers rely on third-party developer capital more than ever. Increased reliance on third-party developers by health systems and other providers seems to be a trend, amounting to 28 percent and 32 percent of transactions in 2020 and 2019, respectively.

However, most health systems remain committed to owning MOBs where they occupy the majority of the building given their low cost of capital and tax-exempt ownership status. On the other hand, health systems also are realizing value-based returns from projects developed, owned, and managed by experienced healthcare real estate firms.

Another contributing factor to the rise in health systems utilizing third- party developers is the significant increase in materials and labor costs associated with construction. At $435 per square foot, the average cost of MOB construction projects undertaken is up 18 percent from last year. Third- party developers tend to have beneficial relationships with construction contractors, can value engineer, and are more efficient throughout the development process given their expertise.

While some experts expressed concern that MOB development and new project planning could fall during the COVID-19 pandemic as healthcare systems and providers focus on a surge of patients, investor demand has remained strong, and investors are paying premium pricing for recently developed MOBs.

Cap Rates Comparison Graph

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

Price Per Square Foot Comparison, Q1 2015-Q3 2021

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

Investment Sales and Trends

The largest single-property transaction in the second quarter was American Realty Advisor’s $231 million acquisition of a Class-A MOB in San Francisco. The nine-story, 179,000-square-foot Class A building is located across from Oracle Park in the SOMA district. The property was originally constructed in 2002 and is currently 100 percent leased, with as the anchor tenant, occupying 92,993 square feet. 153 Townsend also offers large decks on upper floors, providing expansive views of San Francisco Bay and easy access to public transportation two blocks away.

The largest portfolio transaction in the third quarter was completed by Nuveen and NexCore Group, which acquired a 29-property MOB portfolio totaling 1,132,235 square feet across 13 states for $620.4 million, or $532 per square foot. The acquisition includes $463 million of medical office buildings and $157 million in life sciences facilities, occupied by leading health systems, physician practices, research institutions and life sciences companies. The seller was Los Angeles-based IRA Capital, which acquired a majority of the properties sold from 2019 through early 2021.

Regional Review

The West region (5) had the greatest transaction volume and highest average per square foot compared with other RCA-tracked regions at $864.3 million and an average of $589.9 per square foot. Of this volume, $231 million was attributed to American Realty Advisor’s purchase of 153 Townsend Street in San Francisco. Notably, Q2 saw a high fluctuation in cap rates across two regions as cap rates in the Midwest and the Southeast increased by nearly 12 percent. The Northeast, on the other hand, recorded the lowest cap rate in the third quarter at 5.8 percent.

Cap Rates REgional Comparison Graph

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


Northeast Region

In July, LaSalle acquired the remaining interest of a recently developed MOB that was built-to- suit for Memorial Sloan Kettering (Aa3/NR/AA) located in New York City. Developed by The William Macklowe Company in 2020, the six-story, 74,112-square-foot MOB is situated in Manhattan’s “Hospital Row,” which has a cluster of world- renowned hospitals, medical schools, research centers, and outpatient facilities. Services at the property include cancer care, geneticist, immunotherapy and surgery. The implied valuation of $95 million equated to $1,282 per square foot.

In August, Minneapolis-based Davis acquired the 10-story, 107,228- square-foot 84 Marginal Way building in Portland, Maine. The "Class A" MOB is fully occupied and anchored by InterMed, the state's largest private practice. Services at the property include patient care with audiology, laboratory testing, radiology, diagnostic imaging, as well as therapeutic services, such as physical therapy. The $37.8 million purchase price equated to $353 per square foot.

In September, Hammes Healthcare started construction on a four-story outpatient clinical tower on the site of a former Sears store at Marketplace Mall in Henrietta, a suburb of Rochester. The future tower will be flanked by an ambulatory surgery center (ASC), for which construction began in 2020. The two facilities will have a total of more than 400,000 square feet, occupied by the University of Rochester (UR) (Aa3/AA-/AA-) Medicine Center for Orthopaedics and Physical Performance. Upon opening the facility will provide clinical care, research, education, and community wellness supported by eight operating rooms, with additional pre- and post-operative rooms to support the most complex orthopedic surgical procedures.

West Region

In August, San Diego-based PMB finalized a transaction with Providence St. Joseph Hospital (Aa3/AA-/AA-) to develop a 137,000-square-foot women's and children's outpatient wellness center on its campus in Orange, Calif. PMB will break ground for the Helen Caloggero Women's & Family Center on the campus of the 463- bed hospital. Services at the facility will include mother/baby assessment center, maternal diabetes and wellness, maternal fetal testing, pelvic health and rehabilitation, perinatal education, OB/GYN clinical offices, pediatric clinical offices, women’s mental health services, a pharmacy, and a Blue Bowl Superfoods outlet. The project is slated for completion in late 2023.

Meanwhile, a development partnership between Hunter Properties and San Jose-based Arcadia Development decided to change plans for a portion of a large mixed-use project in San Jose, Calif., from retail and restaurants to health care. The partnership is developing the future Evergreen Circle, an 80-acre project of 250 homes, sporting fields, and retail. The partnership's plans now call for a 150,000-square-foot, four-story MOB with 697 parking spaces to replace 55,100 square feet of commercial space.

In September, Rubicon Point Partners and its Rubicon First Ascent LP fund acquired a 77,091- square-foot MOB adjacent to the University of California, San Francisco (UCSF) Medical Center's (Aa2/AA-/AA-) 107-acre multi- building Parnassus campus. The nine-story MOB at 350 Parnassus Avenue is 86 percent leased, with UCSF occupying 46,729 square feet, relatively two-thirds of the space. The tentative purchase price of approximately $60 million equated to $778 per square foot.

Southwest Region

In July, a joint-venture partnership between San Diego-based Cypress Office Properties and Birmingham, Ala.-based Harbert Management Corp. acquired a 180,110-square- foot, two-office complex in Mesa; the partnership plans to continue converting the space to full healthcare tenancy. The Arc, an 87 percent occupied facility at 1840 and 1910 S. Stapley Drive, currently supports about 70 percent medical tenancy. Several hospitals, including Banner Desert Medical Center and Banner Gateway Surgery Center, are within five miles from the office buildings. The $37 million purchase price equated to $205 per square foot.

Construction is also underway on Houston based Texas Children's Hospital's (Aa2/NR/AA) future 365,000-square-foot, 52-bed hospital in Austin, where the pediatric system will offer a wide variety of services focused on women and children. St. Louis- based McCarthy Building Companies Inc. will construct the $485 million project, with plans to deliver the site in Q1 2024. The hospital will provide a wide variety of services, including neonatal intensive care, pediatric intensive care, operating rooms, and emergency care. The campus, located at 9835 North Lake Creek Parkway, will also include a 170,000-square-foot MOB.

In September, a developer planned a healthcare-focused, 22.2-acre mixed-use project in Leander, 25 miles north of Austin, that includes 132,000 square feet of medical and professional space. The Pointe 183 development, which would also include 90,000 square feet of commercial and retail space, is adjacent to a site containing a freestanding emergency department, an MOB and a future hospital operated by Austin-based St. David's Healthcare.

Midwest Region

In July, The Parma VA Multi- Specialty Outpatient Clinic, a 78,622-square-foot MOB operated by the U.S. Department of Veterans Affairs, was acquired by Cleveland- based Boyd Watterson Asset Management LLC. Built in 2011, the MOB is located at 8787 Brookpark Road in Cleveland, Ohio, on an 11.8-acre site within five miles of two major hospitals. The purchase price of $33.5 million equated to $426 per square foot.

In August, Nashville, Tenn.-based Excelsior Capital, which targets mid- sized acquisitions, acquired a 48,323-square-foot, four-story MOB in Kansas City, Mo. The Bethany Medical building, a multi-tenant facility at 21 N. 12th Street. The property is anchored by Vibrant Health (affiliated with Kansas University), Swope Health Wyandotte, and Wyandotte Family EyeCare Center. Vibrant Health currently leases over 60 percent of the property under a new 10-year lease and is obligated to lease an additional 20 percent if it becomes available. The purchase price of $12.8 million equated to $265 per square foot.

In September, NexCore Group joined Southfield, Mich.-based Beaumont Health in opening a new three-story, 109,630-square-foot MOB in Lenox, MI, about 35 miles north of Detroit. The Beaumont Health (A1/A+/NR) Outpatient Campus – Lenox, which includes multiple tenants and provides a wide array of services, including emergency care, is just off U.S. Interstate 94 at 26 Mile Road. The system’s vision was to create a convenient, one-stop medical destination, housing a full array of critical outpatient services.

Following its acquisition of The South Bend Clinic in South Bend, Ind., in July, DuPage Medical Group monetized a portfolio of four MOBs through a sale/leaseback transaction that closed in September. The portfolio featured the South Bend Clinic’s 204,035- square-foot main campus building and three outpatient clinics located throughout the greater South Bend, Ind., area. The portfolio was acquired by Harrison Street in September for $108.7 million, equating to $421 per square foot and a 5.2 percent cap rate.


In July, Remedy Medical Properties acquired the four-story, 95,243- square-foot Cornwall Medical Pavilion at the Inova Loudoun Hospital Cornwall campus in Leesburg, Va., about 33 miles northwest of Washington, D.C. The MOB is anchored by Loudoun Medical Group. Services provided on the behavioral health campus include emergency care, inpatient psychiatry, diabetes services, HIV/AIDS services, and rehabilitation services. The $33 million purchase equated to $346 per square foot.

In September, Highwoods Properties sold an 87,000-square- foot MOB it completed in 2018 for Virginia Oncology located in Richmond. The property features a woman’s health center, surgery center and physician offices. LaSalle acquired the property, which is long- term triple-net leased for $52.2 million, or $599 per square foot.

In August, Dallas-based Trammell Crow Company (TCC) unveiled plans for a 383,000 square-foot mixed-use project in Alexandria, comprising of an 18-story, 215-unit senior living residence as well as a 115,000-square foot MOB. TCC is developing the project at 765 John Carlyle St. in partnership with Washington, D.C.-based JM Zell Partners and CBRE Global Investors. The 10-story MOB will include 12,000 square feet of retail and bring institutional-grade medical spaces to the community. TCC will team up with Senior Resource Group, a luxury senior living operator and developer, for the senior living component of the project and with Remedy Medical Properties, a medical office real estate investment firm, on the medical and retail components.

In September, construction began on The Promise Project, which will include about 195,000 square feet of new medical office space at the Greater Baltimore Medical Center (GBMC) in Towson, a Baltimore suburb. Milwaukee-based Hammes Healthcare is the program manager for the project, which will include a 60-bed 117,000 square foot patient care center and the 78,000-square foot Sandra R. Berman Pavilion, providing a variety of services across the care spectrum by the Sandra and Malcolm Berman Cancer Institute. Hammes has been working with GBMC since June 2019 on the project, which is slated for completion in two phases by Fall 2024.


In July, A local-alternative investment asset management firm is moving forward on its plan to develop a two-building, 165,000- square foot healthcare complex in an area just outside of downtown Orlando, potentially costing upwards of $70 million. Upshot Capital Advisors LLC recently sought building permits for one of the facilities planned on a 2.6-acre site at 1724 N. Mills Ave., about three miles north of downtown. The developer plans to have considerable pre-leasing completed prior to the start of construction.

In August, Miami Mayor Francis Suarez recently unveiled plans for the world's first pandemic-ready skyscraper with residential units, a hotel and a healthcare facility. The future $500 million, 55-story Legacy Tower will be part of the 30-acre, mixed-use Miami Worldcenter; it will be developed by a partnership between Miami-based Royal Palm Companies, Altamonte Springs, Fla.-based Adventist Health (Aa2/NR/AA) and Paris-based Accor Hotels. The $100 million, 120,000- square-foot medical portion, called Blue Zones Medical Center, will be one of the-most technologically advanced health and well-being facilities in the country. Services at the project will include diagnostic, surgical, medical, spa, fitness, lifestyle medicine, and well-being improvement programming.


  1. Based on H2C analysis of industry data from RCAnalytics.

  2. Based on Revista Q3 2021 MOB sales data,

  3. Based on H2C analysis of industry data from CoStar.

  4. Based on H2C analysis of Industry data from RCAnalytics.

  5. All regional data based on H2C analysis of Industry data from RCAnalytics.

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. 

For more information, visit


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

Matthew T. Tarpley

Vice President


Philip J. Camp

Managing Director


Kyle Hopkins

Vice President


Michael E. Fioravanti

Senior Associate


Mitch J. Levine

Senior Associate


Stuart L. Gilbert



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