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Special Report

U.S. Medical Office National Report

2022 Outlook

Demand for Medical Office Space Normalizes;
Investors Flock to Sector in Defensive Strategy

Resumed appointments, aging population enhance medical office space needs. Medical offices have generally weathered the downturn better than traditional offices. After an initial span when individuals were delaying routine procedures and elective surgeries, demand for the services offered in medical offices has improved. While some people continue to practice caution amid the emergence of new COVID-19 variants, ultimately many of these appointments must be fulfilled. All the while, the population is aging, which brings along certain medical realities. These factors together underpin the current strong tenant demand for medical offices. Vacancy in the sector only rose 80 basis points to 9.5 percent in 2020, less than a third of the jump seen in traditional offices. Availability started to tighten late last year, aided by a contracting construction pipeline. This is in turn benefiting rent growth. In the closing months of 2021, the average asking rate was broaching $22 per square foot, up more than 4 percent since the end of 2019.

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