Skip to main content Skip to footer

2022 | First-Half Houston Healthcare Market Report

Download Report
2022_Q2_Healthcare_HERO_1536x1040

Key Takeaways

• Vacancy decreased annually and quarterly
• Mid-year absorption is positive
• Construction and deliveries are up year over year
• Rental rates rose quarterly and annually

2022_Q2_Healthcare_Vacancy Rate    2022_Q2_Healthcare_Net Absorption
 2022_Q2_Healthcare_Under Construction    2022_Q2_Healthcare_Lease Rates

 

Houston Highlights

Houston’s medical office building (MOB) market posted 531,293 square feet of positive net absorption in the first half of 2022, an increase over the 219,659 square feet recorded in the second half of 2021. The vacancy rate fell over the year from 13% to 12.1%. Houston’s MOB inventory increased slightly with 514,775 square feet of new inventory added in the first half of 2022 and there is 2.3 million SF of MOB space under construction. The average asking NNN rental rate rose annually from $22.80 per SF to $23.23 per SF. Transaction volume decreased on an annual basis and increased on a semi-annual basis. According to our data provider Revista, 2022 mid-year transaction volume is just over $298.7 million and the average CAP rate is 6.17%.

Market Indicators

2022_Q2_Healthcare_Market Indicators 

Historic Comparison- MOB only

 2022_Q2_Healthcare_Historic Comparison

The statistical historic comparison table 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.

Market Fundamentals

2022_Q2_Healthcare_Market Fundamentals 

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

Recent Transactions in the Market

 
 2022_Q2_Healthcare_Davita Photo    2022_Q2_Healthcare_Pearland Photo
Sale*
DaVita Anchored MOB
11321 Fallbrook Dr
FM 1960 | 15.4k SF
   Lease Renewal*
Houston Methodist Hospital
Pearland Medical Commons
Pearland | 45.7k SF
 2022_Q2_Healthcare_Kingwood Photo    2022_Q2_Healthcare_League City
 Lease Expansion/Renewal*
Houston Methodist Hospital
4501 Magnolia Cove Dr
Kingwood | 23.3k SF
  Lease Expansion/Renewal*
Houston Methodist Hospital
2220 E League City Pky
League City | 13.5K SF 
 

Executive Summary

Commentary by Coy Davidson

The Houston healthcare real estate market continues to demonstrate strong fundamentals despite the lingering effects of the Covid-19 pandemic and increasing concerns over the economy’s direction and inflationary pressures. In addition, major health systems continue to expand their facilities both on campus and off campus outpatient settings to accommodate Houston’s expanding population and robust job growth.

Metro Houston created 84,600 jobs in the first half of ‘22, the strongest opening on record for Houston’s economy. In addition, the Healthcare sector is fully recovered from its pandemic losses adding 47,900 jobs in the first half of 2022. As with so many other CRE sectors, the pandemic rapidly accelerated shifts in medical office space that were already underway long before COVID-19’s arrival.

Driven by advancing technology, increasing competition and pricing pressure, healthcare delivery is rapidly evolving to become more consumer-centric, moving off the hospital campus to an ambulatory setting.

We continue to see healthcare providers add outpatient space and increasingly take on retail space as part of the outpatient clinic real estate strategy, particularly in Houston’s fast-growing suburban submarkets.

On the supply side, rapidly rising material costs and labor shortages cause delivery delays and extended fit-out periods for new properties.

The greater Houston medical office building (MOB) market includes nine counties and has 43,175,700 square feet, based on statistics from Revista, a national database of healthcare properties.

Construction

At mid-year 2022, an additional 2,387,200 square feet of MOB space is under construction, according to statistics from Revista.

  • Houston Methodist started construction on a new $1.4B hospital tower in the Texas Medical Center and broke ground on its ninth hospital in the Houston metro i290 corridor. The new 471,000 SF hospital will be modeled after the comprehensive Houston Methodist West and Houston Methodist-The Woodlands hospitals. In addition, Houston Methodist also broke ground on a third MOB (150,000 SF) at the Houston Methodist West Campus.
  • Construction continues to progress on the Horizon Tower, a 500,000-square-foot Medical Office and Life Sciences building at the Gateway to the Texas Medical Center, with delivery expected in Q1 of 2024.
  • Kelsey-Seybold Clinic announced plans today to build a 15,000-square-foot clinic in League City and recently opened its new five-story, 125,000 square feet medical office building in the Memorial Villages in West Houston
  • Memorial Herman Healthcare started a 125,000-square-foot expansion of its Katy Hospital Campus and broke ground on a new rehabilitation facility in Webster.

 

Under Construction
150,000 SF or greater

2022_Q2_Healthcare_Under Construction 15k or more

Lease Rates

Rent in Houston properties continued to rise slightly in the first half of 2022 and ended at an average lease rate (all types) of $23.23 per square foot. Asking rates increased 2.2 percent over the previous year.

2022_Q2_Healthcare_Lease Rate Graph

Occupancy

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.

2022_Q2_Healthcare_Occupancy Rate Graph

Sales
 Investment sales volumes in the Houston medical office buildings (MOB) sector started strong in 2022, but slowed in the second quarter of 2022.
 
Twelve (12) Houston area Medical Office Buildings totaling 498,215 square feet sold in the first quarter of 2022 compared to seven (7) totaling 292,007 square feet in the second quarter.

The most notable Houston area MOB transactions in the second quarter included:

  • Big Sky Medical’s acquisition of Bissonnet Medical Plaza in Bellaire.
  • Evergreen Medical Properties acquisition of 500 N. Kobayshi and 600 N. Kobayshi in Webster.
  • Healthcare Realty Trusts acquisition of The Vision Park MOB in The Woodlands submarket.
  • NorthWest Healthcare Properties REIT acquisition of Tomball Medical Plaza in Tomball.
By Year-End, the MOB sales volume for the year in Houston is likely to be record-setting fueled by the recently closed merger of two of the sector’s largest publicly traded real estate investment trusts: Healthcare Trust of America (HTA) into a newly formed Nashville, Tenn.-based Healthcare Realty Trust Inc. Twenty (20) Houston area MOB’s totaling approximately 1.8 million square feet were part of the blockbuster transaction.

 

2022_Q2_Healthcare_number of transactions quadrant

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.

180,000+

annual surgeries

10 million

patient encounters per year

2022_FirstHalf_Healthcare_SearchResultImage_1024x972

2022 | First-Half Houston Healthcare Market Report

Download Report
Related Experts

Lisa Bridges

Director of Market Research

Houston

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.

View expert

Coy Davidson

Senior Vice President

Houston

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.

View expert