Why Medical Office Buildings Remain a Safe Bet in Commercial Real Estate
By Michael Bull, CEO, Bull Realty
In a commercial real estate environment where volatility continues to impact many asset classes, medical office buildings (MOBs) remain one of the most stable and attractive sectors for investors. With growing healthcare demand, sticky tenants, and relatively low vacancy rates, MOBs continue to offer a solid return profile — even amid higher interest rates.
At a time when traditional office space struggles with elevated vacancy and uncertain demand, healthcare real estate is quietly proving its long-term value. To better understand the state of this niche market, we spoke with Paul Zeman, President of Healthcare Real Estate Services at Bull Realty. Paul brings nearly two decades of experience in MOB investment sales and shared timely insights into where the sector stands — and where it's headed.
The Resilience of Medical Office Assets
One of the primary reasons investors are drawn to medical office buildings is their consistency in occupancy and performance — even during economic disruptions. Unlike general office properties, MOBs maintained strong tenant retention and rent collections through the COVID-19 pandemic. According to Zeman, vacancy rates across the sector remain in the single digits, which is impressive compared to other property types that have seen double-digit softness.
Healthcare tenants also tend to invest heavily in their space, making them less likely to relocate. This “stickiness” reduces turnover risk and makes MOBs more predictable than traditional office buildings.
“The tenants historically stay longer than their lease terms,” Zeman explains. “They invest a lot in build-outs, and they pay their bills — that’s what makes these properties so appealing.”
Cap Rates and Investment Activity
Despite fluctuations in capital markets, medical office cap rates have shown relative stability. Zeman reports that cap rates for MOBs priced in the $5–10 million range typically average in the low-7% range, with higher-quality assets trading at cap rates in the 6% range or even lower.
Less desirable assets — those with short lease terms, aging infrastructure, or less creditworthy tenants — may trade at cap rates closer to 8–8.5%, but even those figures remain competitive given the current interest rate environment.
Zeman also noted that there's no shortage of buyers in the space. “From REITs and private equity to offshore investors and family offices, we’re seeing continued demand across the board,” he says.
Is Now a Good Time to Sell a Medical Office Building?
Some owners may wonder if now is the right time to sell, especially considering that interest rates have risen compared to recent years. But according to Zeman, today’s rates are not abnormal in a historical context.
“When I started in this business back in 2007, interest rates were around 7%. What we’re seeing now is actually a return to historical norms,” he says.
More importantly, holding out for lower rates in the future might expose owners to other risks, such as lease term erosion, deferred maintenance, or changes in market sentiment. In many cases, it may make more financial sense to monetize the asset now and reinvest those proceeds into a growing practice or new opportunity.
Supply and Demand Remain Favorable
Supply remains tight in the medical office sector, and demand continues to grow. Zeman notes that new buyers are consistently entering the market, many of whom are seeking long-term, income-generating properties that offer downside protection.
While total MOB sales volume in the first half of 2025 is around $2 billion, the second half of the year is expected to be stronger. Annual volume typically ranges between $8–10 billion, and current activity trends suggest we’re still on track for a healthy year — if not a record-breaking one.
Why Investors Are Doubling Down on Healthcare Real Estate
Many of the funds and groups investing in MOBs focus exclusively on this asset class — and for good reason. The sector combines multiple advantages:
Furthermore, the consolidation of smaller practices into larger health systems has improved credit quality on leases, making these properties even more attractive to institutional and private investors alike.
Final Thoughts: A Long-Term Investment in Stability
Medical office buildings may not be the flashiest segment of commercial real estate, but they continue to offer reliable performance, consistent demand, and attractive risk-adjusted returns.
As Paul Zeman puts it:
“Healthcare needs are never going away. Whether it’s a clinic, surgery center, or specialty practice, the demand for quality medical space isn’t slowing down anytime soon.”
In an uncertain market, investors looking for long-term stability would do well to consider MOBs as a core part of their real estate strategy.