KEY TAKEAWAYS

  • Vacancy: Strong demand for MOBs pushed the national vacancy rate to an all-time low of 7.4% at year-end 2016.

  • Absorption: MOB net absorption increased by 25% in 2016 from 18.1 million square feet to 22.7 million square feet—the highest annual total since 2008.

  • Rents: Full service gross (FSG) MOB rents rose by 8% in 2016 to a national average of $24 per square foot.

  • Construction: Following 14.6 million square feet of deliveries in 2015, the 2016 delivery total is set to exceed 22 million square feet—just below the 2008 peak of 24.9 million square feet. Nonetheless, this new supply is still modest in inventory terms, representing only 1.7% of the total MOB universe.

  • Sales: Total investment in MOBs fell from $11.6 billion in 2015 to a still-respectable $9.3 billion in 2016. At 6.7%, average MOB cap rates are in line with the office sector average cap rate of 6.5%.