Vital Signs 2025

Key Takeaways

• Physician shortages continue to accelerate due to increased retirements and a limited pool of new talent. This care provider shortage has the potential to impact the future growth of the medical outpatient (MOB) sector.
• Absorption has been strong in 2024 as the occupancy rate increased, reaching a new cyclical high of 92.8%. With construction activity subdued, occupancy rates are likely to increase even more in 2025.
• Transaction activity ticked up in the first three quarters of 2024, up 62% over 2023. Portfolio sales activity was also up, growing 54% over the same period last year. Cap rates posted some compression in the third quarter as more investors priced deals with the expectation that interest rates will continue to decline.
• Moderating inflation has slowed expense growth, but it has also tempered revenue, resulting in lower NOI over the past four quarters. A careful rebalancing of expenses is required for NOI to return to pre-pandemic trends.