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We’re now seeing the slow market correction we anticipated begin to pass — and momentum is clearly building into the back half of the year. We expect Q3 and Q4 2025 dollar volume to significantly exceed the first half of the year. These won’t just be bulk portfolio sales — many high-quality single assets are expected to trade.
Portfolio premiums were sidelined over the past few years, but they have officially returned. Packaging multiple high-quality properties is again resulting in lower cap rates, and we expect this trend to strengthen. Demand for healthcare and quality medical facilities remains extremely strong — meaning sellers looking to monetize assets will do well, and investors will find smart buying opportunities.
Vacancy and rental rates are ultimately driven by supply and demand — and new development has been well below average, which is pushing vacancy down.
Single-digit vacancy is considered healthy, and vacancy is currently declining in 2025.
Base rental rates are rising, and will likely continue to do so.
However, tenant expenses (taxes, insurance, utilities) are increasing, resulting in higher effective out-of-pocket costs — even when base rent seems reasonable.
Average 12-Month Cap Rate: 7.2%
Average Q2 2025 Cap Rate: 7.3%
Average Price Per Square Foot: $287
From August 2020 to September 2024, interest rates climbed sharply — the 10-year Treasury moved from 0.60% to as high as 5.00%. As investor cost of capital rose, cap rates followed.
We now expect cap rates to decline, driven not just by interest rates, but by the sheer amount of capital investors are under pressure to deploy. As always, these figures are averages — trophy assets and distressed assets are nowhere close to the same reality. Higher cap rates typically correlate to lower average price per foot.
Large institutional buyers — especially publicly traded REITs — have slowed their acquisition velocity dramatically. Some who previously placed $1B+ per year now anticipate meaningfully less volume in 2025.
But private capital is stepping in hard:
High-net-worth individuals
Offshore investors
Family trusts
Private equity and boutique funds
These buyers are resourceful, active — and currently responsible for the bulk of MOB dollar volume outside of major portfolio trades.
For most of my career, mid-6% cap rates were the historical norm. It wasn’t until 2019–early 2020 that we saw meaningful compression — driven by historically low interest rates. That held until early 2022 when rising rates caused cap rates to edge back up.
MOBs and healthcare assets were impacted — but far less than most other commercial real estate sectors.
Today, buyers and sellers are adjusting to what is now a ‘normal’ interest rate environment. Developers, health systems, and large physician groups are still selling assets to redeploy proceeds into higher-return projects — a smart and common move.
Indications are that rates will not rise further, and the brief stall we saw is being replaced by renewed underwriting confidence. The fundamentals of this sector have never changed — demand for healthcare will only rise. Investor demand for quality assets remains extremely strong.
Even best-in-class properties do not achieve top pricing without expert positioning and execution.
If you’d like to discuss the best strategy to position and maximize the value of a specific MOB or portfolio, contact me directly:
Paul Zeman
President, Healthcare Real Estate Services
Partner, Bull Realty
(404)‐876‐1640 x 133
Paul@BullRealty.com
I also recently shared a short 10-minute MOB Investment Sales Market Update on America’s Commercial Real Estate Show. You can listen at www.CREshow.com, Apple Podcasts, Spotify, YouTube — wherever you get your podcasts.