Healthcare vital signs: The complete series

The medical office sector entered this cycle on unusually firm footing. Cap rates have held stable, new supply is growing at roughly 1.1% of inventory per year, occupancy sits at a cyclical high, and institutional sellers continue to move product into private hands. Those conditions read less like a passing moment and more like a durable thesis, and they carry different implications depending on where you sit in the market.

Healthcare Vital Signs is a five-part QuickTake series from Northmarq's National Healthcare Group, built to translate the same underlying dataset into clear, actionable insight for five distinct audiences. Each report distills real-time market data into a concise set of truths about current conditions and opportunities worth acting on.

Explore the full series below, then download the report most relevant to your role.

Part 1: Physicians who own their practice real estate

Audience: Owner-occupiers, partnership groups and retiring principals who hold both a practice and the building it operates in.

Core themes: The value that separates a physician-owned building from institutional pricing sits largely inside decisions the owner controls. Lease structure, term and documented rent shape valuation more than building quality does. Tight occupancy gives owners leverage, and a monetization window is open for those weighing a sale, a sale leaseback or a transition.

Key data points:

• Provider-owned medical assets traded at average cap rates of 7.8% to 8.0% over the past 12 months, against 6.3% to 6.4% for real estate investment trust (REIT) and health-system product.
   
• On a property producing $400,000 of net operating income, the difference between a 7.9% and a 6.5% cap rate is roughly $1.1 million of value.
   
• Private and investor buyers acquired 78% of all medical office building dollar volume over the past year.

Download the report: Healthcare vital signs, part 1

Part 2: Private investors buying for income

Audience: Private capital, family offices, 1031 buyers and syndicators who invest for durable cash flow.

Core themes: The data reads like a durability thesis, and the discipline it rewards is underwriting to the real clearing price rather than the headline one. Reading the buyer type behind every comp protects an investor's basis, and the current spread pays for genuine diligence rather than further cap rate compression.

Key data points:

• Medical office cap rates have been essentially flat for four consecutive quarters, holding in a narrow window between 6.98% and 7.07%.
   
• REIT buyers paid an average of $566 per square foot over the past 12 months, against a market-wide average of $386.
   
• REITs sold $8.3 billion against just $0.5 billion in acquisitions, moving institutional-quality product into private hands.

Download the report: Healthcare vital signs, part 2

Part 3: Developers

Audience: Ground-up developers, conversion specialists and capital partners.

Core themes: Tenants pay a significant premium for new medical space because it is scarce and competing developers have stepped back. The development case is unusually clean; the discipline lies in choosing the path to deliverable space that actually pencils. Conversion has moved into the mainstream as a faster, lower-basis route, and projects breaking ground now arrive into a market with almost no competing delivery.

Key data points:

• New medical office buildings command $35.06 per square foot triple net against $25.43 for existing product, a 38% premium that has widened every year since 2017.
   
• Conversions tripled from 4% of deliveries in 2019 to 12% in 2026, at an average cost of $415 per square foot versus $574 for ground-up.
   
• Hospital starts have dropped to a series low of 14.8 million square feet on a 12-month trailing basis.

Download the report: Healthcare vital signs, part 3

Part 4: Corporate healthcare operators

Audience: Health systems, management services organizations, private equity-backed platforms, and ambulatory surgery center and specialty operators.

Core themes: Real estate has moved from an execution detail to a gating factor on growth, and operators who recognize that early secure site control as an advantage rather than a scramble. The off-campus thesis is now visible in the occupancy data, conversion offers the fastest route into a market with little space, and owned real estate can serve as low-cost capital for core operations and acquisitions.

Key data points:

• Occupancy sits at a cyclical high, supply growth is 1.1%, and space per healthcare employee has fallen roughly 9% from pre-pandemic levels.
   
• Off-campus medical office occupancy climbed from roughly 90.8% in 2021 to 92.1%, with the on- and off-campus spread compressed to a cycle low.
   
• Hospitals and health systems sold $0.8 billion of medical office at a 6.4% average cap rate over the past 12 months.

Download the report: Healthcare vital signs, part 4

Part 5: The advisors

Audience: Healthcare counsel, transaction attorneys, CPAs, and wealth and practice advisors.

Core themes: A client's building is valued on documents, not square footage, and the advisor who raises the real estate question early protects real value. Because corporate and private equity acquirers increasingly separate the practice from the real estate, sequencing the real estate decision late leaves a physician-owner with a below-market lease, an unfavorable term or both. The mechanics behind the provider-owner cap rate gap are all fixable in advance.

Key data points:

• A 100- to 170-basis-point spread separates provider-owned from institutionally owned medical assets, driven largely by lease documentation, term, escalations and rent at market.
   
• Cap rates have held stable for four quarters, private buyer demand sits at a cycle high and occupancy is at a cyclical peak.
   
• Below-market rent, short remaining term and undocumented expense responsibility each translate directly into a lower clearing price.

Download the report: Healthcare vital signs, part 5

Learn more about Northmarq's National Healthcare Group

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