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2021 | Year-End Houston Healthcare Market Report

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Key Takeaways

  • Vacancy decreased annually and quarterly
  • Year-end absorption is positive
  • Construction and deliveries are up year over year
  • Rental rates rose quarterly and annually
2021_YearEnd_Healthcare_VacancyRate    2021_YearEnd_Healthcare_NetAbsorption
 2021_YearEnd_Healthcare_UnderConstruction    2021_YearEnd_Healthcare_LeaseRates


Houston Highlights

Houston’s medical office building (MOB) market posted 869,962 square feet of positive net absorption in Q4 2021, bringing the year-end total to 859,192 square feet. The vacancy rate fell over the year from 12.9% to 12.1%. Houston’s MOB inventory increased slightly with 471,245 square feet of new inventory added in the second half of 2021 and there is 2.4 million SF of MOB space under construction. The average asking NNN rental rate rose annually from $22.97 per SF to $23.29 per SF. Transaction volume decreased on an annual and quarterly basis. According to our data provider Revista, 2021 year-end transaction volume is just over $369.5 million and the average CAP rate is 6.59%..

Market Indicators


Historic Comparison- MOB only



Market Fundamentals


The forecast in the graph above is based on a trailing eight-quarter average.

The statistical historic comparison table to the left reflects medical office buildings (MOB) only.

The lease rates are an average of published available rates. Not all properties listed publish an asking rate. Our healthcare experts report actual deal rates trend slightly higher when incentives are included.

Executive Summary

Commentary by Beth Young, CCIM, LEED AP | Senior Vice President

The pandemic emphasized many reasons why so many investors and lenders are chasing healthcare real estate. People showed up to their doctors’ offices even when they couldn’t go anywhere else. Conditions like stable tenants with strong-credit, good locations with high visibility, demographic drivers that heighten consumer demand, and long-term leases at market terms make this commercial real estate sector a constant winner. Some investors have used the words “durability” (speaking of credit) and “duration of income” (regarding lease terms) to describe why they want these buildings. Once investors noticed the resiliency of the asset class, pricing and allocations increased by all types of buyers.

The greater Houston medical office building (MOB) market includes nine counties, and has 43,175,700 square feet. As of the end of 2021, an additional 2,209,310 square feet were being developed based on statistics from Revista, a national database of healthcare properties.

Some of the current MOB and hospital projects over 100,000 square feet include the following:


*MOB - Medical Office Building

Lease Rates

Rent in Houston properties continued to rise throughout 2021 and ended at an average lease rate (all types) of $23.04 per square foot. Asking rates generally ranged from $16.64 to $33.69, which provided a 1.2 percent increase over the previous year. As always, there are exceptions; and the average rate in properties that sold was $23.30 per square foot. Houston’s rates are marginally lower than the national average lease rate which was at $23.09 per square foot. Some notable leases in 2021 included UT Physicians at 6500 West Loop South for 139,243 square feet, Christus Health at 2900 N Loop West for 21,213 square feet, and Memorial Hermann Surgery Center at 2455-2473 S. Braeswood for 19,942 square feet.



Houston occupancy fell during the early part of the pandemic and rose during 2021, when over 800K square feet were absorbed in the marketplace. The Q4 2021 occupancy number was right at 88.0 percent. About a million square feet are scheduled to deliver in the market for 2022.



Newer or recently renovated MOBs are highly prized by healthcare property investors. The 2021 total sales for the greater Houston market has recently been revised up by Revista, the national resource for healthcare real estate data, to $369,516,836 made up of 31 properties and showing a 47.6 percent increase in the number of sales over the past twelve months. Since the total square feet sold was 1,088,858 SF, 1.6% percent less than the previous year, it explains the higher price per square foot of $439.90, which is 32.8 percent higher than one year ago. The greater Houston market ranked as the 8th most active metro in the country. National sales set a quarterly record in Q3 2021, and preliminarily finished the year with a sales volume of $15.3 billion, trailing only 2017. However, it is expected that 2021 will ultimately set another annual record as soon as final tallies are done.



Cap Rates

The following graph shows how cap rates have compressed for MOBs in the U.S. over the past three years:


The following graph shows how cap rates have compressed for MOBs in the U.S. over the past three years:

MOB Cap Rate Trends | Portfolio vs. Single Property


The 25th percentile is for value-added properties, and the 75th/95th percentiles are institutional-quality properties. They may be even lower in some cases. In recent years, the difference in cap rates between on and off campus has widened to 5.7% average for on and 6.4% for off campus assets. These numbers reflect a combination of all types of asset classes. Sellers have learned that packaging multiple properties in one offering will usually bring a higher price per square foot, or a lower cap rate. Because of this trend, many owners are holding on to properties until they can offer several together as a portfolio. See the graph below based on national MOB sales to understand this theory:


Seller and Buyer types tend to fall into different cap rate ranges also. Below shows the national trends for both:



When interest rates go up, cap rates typically adjust upward also, meaning prices move down. While there was available debt at low interest rates, prices stayed high. Based on the prediction of several interest rate hikes in 2022, it will be interesting to see how much MOBs are affected.

Recent MOB Transactions

Sometimes our sources are able to provide prices and cap rates for MOB properties that have sold. Below are details on some 2021 sales.

2021 MOB Cap Rate Trends


2021 Hospital/Other Sales



Hospital News

HCA, the largest health system operating 45 hospitals in Texas, recently announced it is expanding to keep up with the growth in the state. It will add another hospital in Houston, while also adding hospitals in Dallas, San Antonio and Austin.

Houston Methodist, which has seven hospitals in the greater Houston area, is expanding their Sugar Land hospital by 466,000 square feet for $206 million, and expects it to be completed by early 2025. In addition, they have several new MOBs coming to the market. A $57 million, six-story, 160,000 square foot facility will be in Sugar Land. Another MOB will be built on the campus of its Houston Methodist West Hospital and is a $65 million project that is also six stories and 160,000 square feet. The projects should be completed in Q1 and Q3 2023, respectively. Methodist is also building a 150,000 square foot MOB in Clear Lake plus a 260,000 square foot hospital in The Woodlands that will open in May.

Memorial Hermann’s The Woodlands Hospital is also in progress. The cost is estimated at $250 million for the 475,630 square foot project which is expected to open in May. Their Medical Group has signed a 20,000 square foot build-to-suit lease to be developed by Howard Hughes in The Woodlands. Texas A&M is building a 485,000 square foot MOB called Horizon Tower. The cost is estimated at $215 million.

Hospitals track their development cap rates, price per bed and price per SF. Below shows the trailing twelve months (TTM) trend of trades higher than $2.5 million over the past three years:


Life Sciences and R&D

Houston has received recognition as one of the strongest cities on the list of top emerging clusters for life sciences in the U.S. According to the Greater Houston Partnership, Houston has more than 1,760 life sciences companies, hospitals, health care facilities and research institutions with a workforce that exceeds 320,000. Construction has begun on TMC3, the 37-acre, $1.8B innovative, collaborative plan anchored by leading research institutions and will become the central hub of the Texas Medical Center’s new life science campus. Several other large Houston landlords are also planning and growing life science campuses around the city, with some of the more notable locations including Generation Park within 4,200 acres northeast of Sam Houston Parkway N and Interstate 69, and Levit Green with 53 acres inside the 610 Loop, north of the TMC. Capital markets national activity in the life science sector climbed to new records in 2021, with investment volume hitting more than $18 billion – and experts expect pricing will only continue to rise this year. That’s a 64% increase year-over-year, according to one report. The annual average pricing for life science and R&D space with an office component hit an average of $537 per square foot nationally in 2021, more than 50% higher compared to figures from five years ago.

New Medical Education

Located in the Texas Medical Center, EnMed is a revolutionary medical education program where students receive medical doctorates and master of engineering degrees focused on the design and implementation of medical technologies in the same four years. They are in the planning stage for a 515,000 square foot MOB that would open in February of 2024. The estimated cost is $170 million. In summary, there is so much going on in Houston’s medical world that we can only include information about the largest projects in this report. Please contact us to discuss your healthcare property.


As we look ahead to 2022, investors and developers plan to remain busy; but they also say it will be a more challenging year for both acquisitions and new construction. The issues they continue to discuss include inflation, rising interest rates, more spread between asking and bidding prices, supply chain challenges and labor shortages. The appetite for healthcare properties is expected to be even stronger this year, but the lack of available product is expected to remain. Owners who are considering selling a single property explain that they are concerned they won’t be able to compete for a replacement MOB. They believe keeping the one they have that is producing income may be their best option. 2020 and 2021 were both years where sales of portfolios increased dramatically. The average price of the properties was higher in a portfolio than similar properties marketed individually. With that in mind, landlords of larger healthcare-property portfolios who plan to sell some buildings will probably hold them off the market until they can package them in a portfolio. Check back with us to see what trends are developing as the year goes on.

Houston's Texas Medical Center

The Texas Medical Center (TMC) – the world’s largest medical center – represents one of Houston’s major economic drivers and core industries with an estimated regional annual economic impact of $25 billion. TMC is also one of Houston’s largest employers with 106,000 employees, including physicians, scientists, researchers and other advanced degree professionals in the life sciences. The internationally-renowned 1,345-acre TMC is the world’s largest medical complex of member institutions, including leading medical, academic and research institutions, all of which are non-profit and dedicated to the highest standards of research, education and patient preventive care. Over 50,000 students, including more than 20,000 international students, are affiliated with TMC.

TMC Stats

50 million

developed square feet

$3 billion

in construction projects underway

8th largest

business district in the U.S.


annual surgeries

10 million

patient encounters per year


2021 | Year-End Houston Healthcare Market Report

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Related Experts

Lisa Bridges

Director of Market Research


Lisa joined Colliers in 2010 as Director of Market Research and has 37 years of commercial real estate experience. Lisa initiates proactive market research projects to further the business goals of the company. She writes and prepares 29 market reports annually, including quarterly reports on Houston's retail, office, industrial and healthcare properties.  Further, she prepares statistical ownership reports for various clients as well as an annual Houston Economic Overview. Lisa also creates PowerPoint market presentations, trade journal articles, and other marketing materials supporting the company's business endeavors. She works with senior management in planning the company's marketing strategy and public relations support for local and national conferences, luncheon meetings, recruitment programs, and special events.  Lisa works closely with the company's brokers to develop effective custom market research material specific to existing and potential clients.

Lisa serves on the Colliers Editorial Board, the Colliers U.S. Research Council, and is a recipient of the Colliers Researcher of the Year Award.

Lisa earned the Commercial Property Research Certification (CPRC) from Colliers University.  CPRC is the first and only accreditation for commercial real estate research professionals. It offers a professional development path to increase strategic and tactical expertise in marketing/research, knowledge of the industry and capabilities with commercial real estate tools.

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Beth Young

Senior Vice President


Beth Young is a real estate advisor to health systems, private and institutional investors, and users of medical facilities. She specializes in dispositions, acquisitions, marketing, asset valuation, contract negotiations, and leases of medical and investment properties. 

Prior to joining Colliers, Beth was Vice President of the Investment Services Group of the former Grubb & Ellis Company where she specialized in the sale of investment properties including office, medical, retail and industrial buildings, and was a member of the Healthcare Practice Group. From 1996 to 2002, she served as Vice President of Corporate Services for The Staubach Company, now JLL.

Beth has served in numerous executive positions on the Boards of the Houston/Gulf Coast Chapter of CCIM, the National Board of the CCIM Institute, CREW, CoreNet Global, and the Greater Houston Women’s Chamber of Commerce.  In 2002, she was the first female to be elected President of the Houston/Gulf Coast Chapter of CCIM. In 2003, she was presented with the Presidents’ Cup Award, the international award for outstanding achievement and leadership by a chapter president. In 2003 and 2004 she was elected Regional Vice President of CCIM’s Region Four over Texas, Louisiana and Oklahoma.  

Beth is a Director of the Greater Houston Women’s Chamber of Commerce and has served since 2011. She is the Chamber Liaison with the Texas Medical Center; and has been recognized and presented with many awards including the Chamber’s Volunteer of the Year, President’s Key Supporter Award, the first Role Model Award and the Committee Chair Award. Beth is a Trustee and Assistant Secretary on the Harris County Hospital District Foundation Board and is Chairman of the Small Grants Committee. She has also served on the boards of the American Heart Association and the War Against Drugs. In addition to being an industry speaker at conferences, she regularly writes healthcare property articles that have been published by, Knowledge Leader, the Houston Medical Journal, Texas Real Estate Business, REDNews, Commercial Investment Real Estate magazine for the CCIM Institute, CREW White Papers, the Houston Chronicle, and the RCA Report for the National Association of Realtors. 

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