What’s Ahead for Medical Office in 2026

December 2, 2025

Medical Office Development Featured Health Care More Investment National

From demographic tailwinds to policy shifts, here are the trends that will shape the sector in the upcoming year.

The past year in commercial real estate was marked by continued volatility: from shifting policy and tariff pressures to broader economic uncertainty. While the medical outpatient sector has not been entirely immune, medical office buildings have once again demonstrated why they’re considered one of the industry’s most stable asset classes.

High occupancy levels and strong tenant retention remain hallmarks of the MOB sector, and a restrained construction pipeline has helped support rent growth. But the most powerful force sustaining demand is demographic: an aging population that increasingly relies on outpatient care. Baby Boomers now account for a significant and growing share of patients. From 2023 to 2024, the U.S. population age 65 and over rose by 3.1 percent, while the population under 18 declined by 0.2 percent, according to U.S. Census data.

These long-term trends will continue to drive outpatient utilization, helping insulate MOB fundamentals from broader economic volatility. Greater clarity around federal policy and the timing of rate cuts would meaningfully improve investor confidence, paving the way for more active deal-making in 2026 and a gradual—but selective—return of development.

Setting the stage for next year

The medical office sector outperformed in 2025 as investors gravitated toward its steady returns and durable cash flows. This asset class “continues to offer revenue opportunities not seen in many other property types,” according to Shawn Janus, national director at Colliers, who noted that private equity partnerships with provider practices and health systems have further strengthened confidence in the sector.

Exterior shot of the 137,000-square-foot Helen Caloggero Women’s and Family Center, developed by PMB — PMB, in partnership with Providence St. Joseph Hospital, opened the 137,000-square-foot Helen Caloggero Women’s and Family Center in Orange, Calif., back in April 2024. *Image by Caleb Tkach, courtesy of PMB*

Macroeconomic pressures and shifting policies have had only a limited effect on demand. “Despite so many headwinds, we continue to see really significant growth,” said Sandy Romero, head of health care insights at Cushman & Wakefield.

Much of the momentum stems from demographics. The aging Baby Boomer population continues to increase utilization of both outpatient and inpatient care. While it’s true that positive fundamentals carried over from 2024, it’s this demographic swell that remained the sector’s most powerful driver.

Capital markets dynamics, however, were less consistent. “High interest rates and sluggish capital markets hit the smaller and less stable health-care providers the hardest,” said Blake Williams, COO of health care advisory services at Transwestern. By contrast, well-established health systems with strong balance sheets were able to move forward with strategic plans, including infrastructure upgrades and new developments, even though new construction in 2025 has been limited and heavily pre-leased, which pushed occupancy and rents higher across existing inventory.

Looking ahead, regulatory uncertainty could also become a significant challenge. Romero cautioned that potential changes to Medicaid may lead some patients to skip appointments, creating downstream impacts for providers and the facilities they occupy. Janus added that the One Big Beautiful Bill Act, which he described as “one of the most comprehensive health-care legislations since the Affordable Care Act,” could meaningfully reshape where and how care is delivered.

This makes location strategy increasingly critical. As hospitals and physician groups continue shifting from rural settings to denser, high-demand markets—particularly across the Sun Belt—identifying the right geography will be a top concern for health systems and providers, according to Allan Swaringen, president & CEO of JLL Income Property Trust. Moreover, the rise of telehealth adds another layer of complexity as providers reassess which services require physical space. To navigate these pressures, a disciplined, data-driven operating approach is essential.

“You have to be bullish in our industry, or you would be miserable every day,” said Jake Rohe, managing partner & president at PMB.

That optimism is underpinned by several long-term demand drivers: the need-based nature of outpatient care, insurer preferences for lower-cost sites of service and technological advances that are enabling higher-acuity procedures outside hospital settings. All of these elements influence how capital flows into the sector and what gets built, and reflect ongoing MOB investment patterns.

Investment and development trends

Investor interest in medical office assets remains strong, even as the pipeline of available properties stays limited. Private equity and foreign capital—largely through professionally managed domestic funds—are actively pursuing opportunities across the sector, according to Janus. He points to one of the year’s most notable transactions: Welltower’s decision to sell its medical office portfolio to Remedy Medical Properties, a move that reflects investor appetite and evolving dynamics within health-care real estate.

Exterior shot of Highlands Ranch I & II, a medical office property in Highlands Ranch, Colo. — The Remedy Medical Properties and Kayne Anderson Real Estate joint venture acquired three medical office properties in metro Denver in September. While not part of the Welltower portfolio, Highlands Ranch I & II (pictured above) are among the types of outpatient facilities included in the $7.2 billion deal. *Image courtesy of Kayne Anderson Real Estate and Remedy Medical Properties*

The REIT is repositioning its focus toward senior housing, while Remedy, in partnership with Kayne Anderson Real Estate, is acquiring the 18 million-square-foot, 296-asset outpatient portfolio across 34 states for $7.2 billion. The first tranche closed in October, with 123 properties selling for $2 billion. The remaining closings are expected through mid-2026.

Meanwhile, caution persists on the development front. Elevated financing and construction costs continue to push required returns above levels supported by existing rent structures, a dynamic that Janus believes is keeping supply in check. Still, Romero argues the sector is beginning to turn a corner. “We continued to see a slowdown, but now we’re actually starting to see an uptick in construction, and that’s significant,” she said, despite costs rising more than 40 percent since 2020.

Construction activity is showing momentum in select markets, including Dallas, Houston, Miami and Tampa. High-occupancy markets such as New York, San Francisco and Los Angeles are also experiencing renewed interest.

The U.S. is now home to 28,726 medical office properties totaling more than 2.2 billion square feet, according to Yardi Matrix, with Houston, Washington, D.C., Los Angeles, Chicago and Manhattan the top five markets in the country by inventory, driven by dense populations, deep health-care ecosystems and strategic infrastructure.

Getting projects off the ground will remain complex because it requires “a very strong health care business case,” noted Rohe, adding that investment performance is closely tied to risk and often anchored by leading health systems. Available financing tools have evolved beyond conventional equity and debt, and now include credit tenant leases, synthetic leases and both taxable and tax-exempt lease revenue bond issuances.

Taken together, these shifts in investor appetite, development feasibility and financing availability offer important clues about what the next year may hold.

What to expect in 2026

Industry specialists largely agree that medical office will continue to provide stable performance and attractive opportunities in 2026, buoyed by the expansion of outpatient facilities and ambulatory surgery centers. Janus expects adaptive reuse to play a growing role in that evolution, with vacant retail and traditional office spaces increasingly converted to accommodate medical services.

Location and efficiency will remain critical differentiators, particularly as medical office buildings are designed to support higher-acuity procedures. Janus sees these priorities intensifying as partnerships between health systems, providers and pharmacy managers become more pronounced, especially if potential medication tariffs raise patient costs.

On the capital and construction front, Romero anticipates improving investor sentiment and more visible development activity in supply-constrained markets. Greater policy clarity and continued rate cuts would help investors pull the trigger on deals they’ve been working on.

“It’s all about demand,” believes Romero.

Still, Williams cautioned that the sector is slow to change, meaning major supply shifts or large new projects are unlikely in the near term. The primary focus, he said, will be optimizing occupancy costs.

The long-term outlook remains anchored by durable fundamentals. And the sector’s foundation is solid. Occupancies are now their strongest of the past decade, about 93 percent, up from just under 91 percent over the last two years, with tenant retention spiking to almost 89 percent annually, according to Transwestern Executive Managing Director Hans Nordby. Supply has tightened meaningfully since 2019: Quarterly deliveries fell from 27 million to 20 million square feet, and new construction starts dropped to 17 million square feet.

“We would give the medical office property a good bill of health and anticipate its continued strength as a resilient component of a diversified core real estate portfolio,” said Swaringen.

Overall, 2026 is expected to bring steady performance and selective expansion, with long-term upside tied to outpatient migration, adaptive reuse and disciplined capital deployment.