Q4 2025 NORTHERN NJ MEDICAL STATS

 Q4 2025 STATE OF THE HEALTHCARE MARKET

BY THE NUMBERS

Over 28,700 medical office buildings (MOBs) with more than 2.2 billion square feet of space currently exist in the U.S. Manhattan currently ranks as the fifth-largest MOB market, with 90.5 million square feet of specialized space across 377 properties, accounting for about 4% of the nation’s total MOB stock. Defining this market? Extreme density and institutions like NYU Langone, Mount Sinai, and NewYork-Presbyterian, which continue to anchor the borough’s high demand and rental rates.

Unlike sprawling markets like Houston or Los Angeles, Manhattan faces geographic constraints, high land costs, and rigid zoning laws. Thus, ground-up development is rare; as of mid-2025, only 636,100 square feet across three projects was under construction. To ameliorate the lack of available land, owners and health systems are increasingly prioritizing the vertical expansion and modernization of existing structures. One example? The $20 million renovation of the Park Sixty MOB, which enhanced its infrastructure to meet modern clinical standards.

The shift toward outpatient care remains a dominant trend. The Hospital for Special Surgery (HSS) is nearing completion of its 400,000-square-foot tower on the Upper East Side, which will serve as a surgical and outpatient hub starting in 2026. This project reflects the broader Manhattan strategy: creating high-density, high-acuity facilities bringing specialized services into urban neighborhoods. Despite limited new supply, the borough’s institutional strength cements its position as a global center for medical excellence and a resilient target for CRE investment.

According to one report, MOB transaction volume in H2 2025 was expected to pick up after a slow first half, with Q3 seeing an increase to $2.7 billion (a 27% QoQ rise), signaling stronger investor interest despite overall caution driven by:

• Positive demand
• Record rents
• Economic growth supporting healthcare services

While specific H2 totals are still pending, the trend points to a significant rebound from early 2025’s muted activity, with projections suggesting a substantial volume increase by year-end, according to multiple reports.

Record high rents ($25.20 per square foot in Q3) and positive net absorption (2.4M square feet in tracked markets) indicated strong underlying demand for MOB space. The adjusted cap rate expanded 30 bps over Q2 2024, according to one report. By the end of Q3, 1,055 qualifying properties representing 54.14M square feet and valued at $16.27 billion changed hands. MOBs had the largest share (807 trades, $8.5 billion, averaging $360 per square foot, with an average transaction size of $10.5 million).

This report found that:

Standard MOBs traded at an average cap rate of 6.9%, while office properties with medical suites commanded higher yields, averaging 7.9%. General hospitals maintained their position as premium assets, commanding the lowest yields in the industry.

Among specialized facilities, rehabilitation hospitals emerged as the most active sub-sector. Nineteen properties sold for a combined $580 million, averaging $569 per square foot. The market for behavioral health centers and long-term acute care (LTAC) facilities remained sluggish. Pricing averaged $218 per square foot for behavioral health and $139 per square foot for LTAC hospitals.

WHAT’S NEXT?

The MOB sector enters 2026 as a cornerstone of stability within the broader CRE market. A demographic shift, especially the 3.1% annual growth of the U.S. population aged 65+, has driven demand for outpatient services. This surge in patient needs has pushed medical office occupancy to 93% — the highest level in a decade — while tenant retention has stabilized at nearly 89%. The sector remains largely insulated from the economic volatility affecting traditional office and retail spaces.

Large-scale portfolio movements and private equity partnerships will continue to reshape investment activity. One example? The $7.2 billion sale of Welltower’s outpatient portfolio to Remedy Medical Properties and Kayne Anderson Real Estate, suggesting a robust appetite for established healthcare assets even as REITs pivot toward senior housing. While high financing and construction costs have tempered the development pipeline, interest in adaptive reuse remains high. Developers are increasingly converting vacant retail shells and traditional office buildings into modern clinical spaces to meet local demand without the steep costs of ground-up construction.

The industry will continue to watch federal policy shifts, including OBBBA’s impact on Medicaid and reimbursement structures. These regulatory changes are expected to influence location strategies, driving a migration toward high-density markets in the Sun Belt. Despite these potential challenges, the shift of higher-acuity procedures to ambulatory surgery centers and the continued need-based nature of healthcare suggest that the MOB asset class will maintain its reputation for durable cash flows and resilient performance.