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Northern NJ
3,377 Medical Buildings
55,563,644 SF RBA
$23.08 PSF Base Rent |
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Bergen County
481 Medical Buildings
8,923,125 SF RBA
$26.18 PSF Base Rent |
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SALES
12,660 SF | $8,347,500 215 Easton Avenue, New Brusnwick, NJ Buyer: Saint Peters University Hospital Inc. Seller: WF 2016-C34, LNR Partners
63,143 SF | $8,282,250 2200 State Route 10, Parsippany, NJ Buyer: Aceo Realty Seller: Woodside Capital Partners |
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LEASES
12,570 SF 65 Jefferson Avenue Westwood, NJ
10,203 SF 50 Tice Boulevard Woodcliff Lake, NJ
9,461 SF* 400 Broadacres Drive Bloomfield, NJ |
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*Team Lizzack-Horning Transactions |
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Medical office buildings (MOBs) performed well throughout 2024, a trend expected to continue into 2025. With declining vacancy rates, rising rents, and increased leasing and sales activity, industry experts forecast moderate rent growth of up to 1.8% year over year through 2025, while vacancy rates are expected to decrease gradually.
Lower interest rates, easing inflation, and a sustained increase in demand for healthcare services have contributed to this positive outlook as well as other key indicators: - MOB construction completions have gradually decreased since peaking in Q1 2023, contributing to improved market fundamentals
- MOB sales volume rebounded in Q3 2024, reaching $2.51 billion, a 48% YOY increase
- Several key markets, including Atlanta (443K SF), Boston (808K SF), Dallas (595K SF), Houston (687K SF), Orlando (501K SF), and Washington D.C. (554K SF), are expected to experience significant absorption in 2025 despite robust construction pipelines in some areas.
Additional factors positively impacting the healthcare sector include the Federal Reserve’s interest rate cut in September, which marked the first reduction since March 2020 and its plan to continue rate cuts by up to 200 BPs by December 2026. These actions will improve access to capital, enhance refinancing opportunities, and facilitate the issuance of bonds at more favorable rates.
MOB investments continue to hold steady or rise, with several reports indicating a 1% QoQ increase and a trailing fourth-quarter total of $8.5 billion. Patient demand continues to drive MOB growth as more healthcare services are needed, with the MOB industry seeing an annual CAGR of 2.7% since 2019.
Sales prices have dropped slightly to $287 PSF, continuing their decline into a sixth quarter after a $356 PSF peak in Q2 2022. The average MOB cap rate rose to 6.9% by the end of Q4, continuing a trend of increases over the past five consecutive quarters. Triple-net rents increased 0.4% YoY to $23.66 PSF, although rents in several NJ counties are higher than average.
The New Jersey market has been very active in 2024. Valley Hospital opened its brand new Paramus-based hospital in the spring. Hackensack Meridian Health acquired 200,000 SF across the street from Valley’s New Hospital. Summit Health purchased or leased 73,000 SF of brand-new space on Route 208 in Fair Lawn. |
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Here are the Q4 statistics for New Jersey:
YTD statistics - 12 transactions
- 3 sales and 9 leases
- Average rent: $28.54 PSF
- Average lease term: 6 years
- SF leased or sold: 44,588 SF
Northern NJ - 3,337 medical buildings
- 55,563,544 SF RBA
- $23.08 PSF base rent
Bergen County - 481 medical buildings
- 8,923,125 SF RBA
- $26.18 PSF base rent
Essex County - 329 medical buildings
- 5,646,383 SF RBA
- $27.02 PSF base rent
Middlesex County - 501 medical buildings
- 8,224,786 SF RBA
- $23.64 PSF base rent
Hudson County - 190 medical buildings
- 2,325,777 SF RBA
- $25.73 PSF base rent
The next opportunity in healthcare real estate
In September 2024, the healthcare industry added 45,000 jobs, including over 24,000 in ambulatory healthcare services and 1,900 in physician offices. Those numbers will likely continue to grow as the U.S. population ages and more physicians and other medical personnel retire or leave because of burnout. |
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Expect an aging population, increased healthcare spending, and innovative technologies to drive the demand for healthcare real estate in 2025 and beyond. According to a report from HRSA, the top 10 providers with the highest projected demand increase are: - Cardiologists – 17%
- Critical care and pulmonary physicians – 14%
- Urologists – 14%
- Hematology and oncology physicians – 13%
- Hospital medicine physicians – 13%
- Nurse practitioners and physician assistants – 11%
- Gastroenterologists – 10%
- General surgeons – 9%
- Anesthesiologists and CRNAs – 8%
- Emergency medicine physicians – 8%
MOBs are well-positioned to capitalize on several key trends, including patients who increasingly favor convenient healthcare access, often outside traditional hospital settings. The rise of telemedicine and AI-powered solutions is also transforming healthcare delivery and creating new opportunities for innovative facility design.
The 2024 market performance demonstrated several positive indicators. Despite a significant development pipeline, overall vacancy rates for MOBs declined. Average asking rents increased, especially in Q2 2024, reflecting strong demand. Investment activity rebounded with increased sales transactions and a decrease in cap rates — the first decrease since 2022.
Overall, healthcare real estate professionals are cautiously optimistic about 2025. They note a growing sense of stability among investors and operators while emphasizing a need for innovative financing strategies, as traditional approaches may be less viable in the current market.
Healthcare leaders should adopt a cautious and strategic approach to investment and growth as the financial landscape evolves. While inflation remains above target and medical costs continue rising, the industry can navigate these challenges via strategic long- and short-term borrowing and planning.
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Teterboro, NJ | 201 488 5800 Parsippany, NJ | 973 463 1011 |
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