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Mid-Year Houston Healthcare Market Report | 2019

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Houston healthcare real estate market continues to expand in the suburbs

Healthcare Trends

Commentary by Coy Davidson


The Houston healthcare real estate market continued to expand over the first half of 2019 as Houston’s leading Health Systems grow to accommodate Houston’s rapidly increasing population. 

These expansions are not confined to just the Texas Medical Center as providers are investing a significant amount of capital in expanding their suburban footprint at satellite campuses and outpatient centers throughout the metropolitan area.

For the third year in a row, the top Houston-area hospitals reported average outpatient revenues to account for almost half of all revenues, slightly less than revenues generated by inpatient services.

Outpatient clinics are more important than ever before as they become the primary delivery vehicle for care. The traditional hub and spokesmodel in healthcare, which puts hospitals at the center of care delivery, is changing to focus more on ambulatory care.

  • MD Anderson Cancer Center opened its West Houston Outpatient center in June.
  • UTMB Health opened its new Clear Lake Campus in the former Bay Area Regional Hospital in March.
  • Memorial Hermann completed a $25 million-dollar expansion at its Cypress Hospital location.
  • Houston Methodist The Woodlands announced a new $240 million, 100-bed patient tower, as part of an expansion of their Woodlands Campus, as well as a new 150,000 square foot medical office building on their Clear Lake Campus.
  • HCA Houston Healthcare Tomball announced a redevelopment of the campus with plans for a new 50,000 square foot MOB.
  • HCA acquired all 24 MedSpring Urgent Care centers in Austin, Dallas and Houston from Fresenius Medical Care which included even (7) Houston area locations.
  • CHI St. Luke’s is preleasing a new 60,000 SF Medical Office Building at The Vintage.
  • Kelsey-Seybold Clinic broke ground on a new 5.5-acre clinic in Kingwood and is under construction on a 37,000 square foot clinic in Grand Morton Town Center in Katy.

Medical Office Building Construction 

232,222 square feet of new medical office space delivered in the first half of 2019, which includes 8731 Katy Freeway (102,474 SF), and 121 Vision Park Blvd (58,000 SF), in The Woodlands. Presently there are 673,720 square feet of Medical Office space under construction in the Houston Metro.

Investment Sales

Following several strong years for the medical office building (“MOB”) sector, sales are off to a somewhat slow start in Houston over the first half of 2019.

There were thirteen (13) Medical Office Building sales in the Houston metro in the first half of 2019. compared to twenty-four (24) MOB sales in 2018 and forty-one (41) in 2017.

Lower transaction volumes in the medical office sector despite a vibrant healthcare industry in Houston is two-fold. Despite being an asset class in high demand, transaction volumes are down for all asset classes in commercial real estate.

Secondly and probably the biggest reason is the lack of availability of medical office buildings for sale, particularly high-profile institutional-grade medical office buildings and multi-building portfolios. There is plenty of investor interest in Houston armed with capital to deploy, but deals are difficult to come by in this stage of the cycle and year-to-date sales volume is significantly down from 2018.

Notable Sales in 2019 include:

  • Welltower acquired a 99,000 square feet MOB as part of a portfolio sale at 5420 West Loop South in Bellaire.
  • Altera Development acquired 800 Peakwood (98,105 SF) and 17045 St. Edward Street (40,628 SF) in North Houston.
  • CHI St. Luke’s Health Sugar Land Medical Plaza (120,956 SF)
  • Kindred Rehabilitation Hospital Northeast Houston, a two-story, 46-bed inpatient rehabilitation hospital at 18839 McKay Blvd. in Humble, sold to a health care real estate investor.


Leasing Activity

The majority of healthcare leasing activity in the greater Houston area continues to be driven by major health systems and larger physician organizations as the push to the suburbs continues in both Medical Office Buildings and Retail Centers.

  • MaSThercell leased 32,100 square feet at 253 Medical Center in Webster.
  • Houston Methodist Hospital leased 12,890 square feet at the Boardwalk at Towne Lake in Cypress, expanded their League City clinic at the Tuscan Lakes Professional Building to 19,546 square feet and leased a 6,875-square-foot retail space at Tomball Marketplace.

Vacancy & Availability

Houston’s citywide MOB vacancy rate increased 40 basis points from 13.4% in Q4 2018 to 13.8% in Q2 2019. Currently, 6.4M SF of direct space and 0.3M SF of sublease space is available. Available space differs from vacant space in that it includes space that is currently being marketed for lease, but may be occupied with a future availability date. In contrast, unoccupied is truly vacant and is available immediately.

Rental Rates

Houston’s MOB average asking rental rate increased during the first half of 2019 by 2.6% from $24.53 per SF to $25.17 per SF. The average asking rental rate increased slightly on an annual basis from $25.07 per SF. The average asking rental rate for Class A buildings increased from $28.54 to $29.36 per SF on an annual basis.


The outlook for Houston’s healthcare real estate market remains positive. Healthcare continues to be a primary employment growth sector for the city as Houston’s top health systems remain committed to both growth in the Texas Medical Center and suburban locations. New supply of medical office inventory and tenant demand appear to be in balance in the near term. Houston’s reputation as a major healthcare city will continue to attract interest from investors in the Healthcare real estate sector.

Mid-Year 2019 Houston Medical Office Highlights



Mid-Year Houston Healthcare Market Report | 2019

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Related Experts

Coy Davidson

Senior Vice President


Coy Davidson has more than 30 years of experience in commercial real estate specializing in corporate real estate services, tenant representation, office leasing and investment sales.  Mr. Davidson joined Colliers in June 2000 as Vice President in the Office Services Group.  Prior to joining Colliers, Mr. Davidson served eleven years with two local commercial real estate brokerage firms.

Specializing primarily in office properties and healthcare properties, Mr. Davidson has completed over seven million square feet of lease and sales transactions and the brokerage of more than 1,000 acres of land development sites throughout the Greater Houston area and has assisted clients in multiple cities throughout the United States. 

Mr. Davidson has vast experience with Healthcare related entities including major hospital systems and private physicians in the Texas Medical Center and throughout Greater Houston and is a member of Colliers International National Healthcare Service Group. His focus on the healthcare sector has resulted in more than $250 million in healthcare real estate related transactions.

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Marshall Clinkscales

Executive Vice President


Marshall Clinkscales began his Houston real estate career in 1972. He joined Colliers in 2008. Prior to joining Colliers, Marshall owned and operated MSC Properties, Inc., the Houston-based commercial real estate company he established in 1981.

Marshall has extensive experience in retail site selection working with clients including Burger King, Golden Corral, Firestone, HEB Grocery Stores, Family Dollar Stores, Texas Citizens Bank, Texas Dow Employees Credit Union, and Fidelity Investments.

In addition, he provided asset management services for Security Benefit Life Insurance Company with services including management, leasing, redevelopment, and ultimately, brokerage of his client’s assets.

His expertise includes office tenant representation, land acquisitions and development. Key office clients have included Litton Loan Servicing, L.P., IMG Financial Group, Shellpoint Mortgage Servicing, Beyond Finance, and Cornerstone Home Lending Inc., where he has responsibility for many of Cornerstone’s branch offices locally and nationally.

Marshall also represents investors acquiring land for development and income producing properties. A current project involves development of just over 126 acres of retail land at Beltway 8 and Fairmont Parkway, recognized as one of Southeast Harris County’s most dynamic retail areas. Among his development projects, he has completed a medical office building, a Class A office building, and a retail center for clients.

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