Skip to main content Skip to footer

2022 | Second-Half Houston Healthcare Market Report

Download Report

Key Takeaways

• Vacancy decreased annually
• Positive absorption recorded
• Construction up year over year
• Rental rates rose quarterly and annually

2022_Second Half_Healthcare_Quad

Houston Highlights

Houston’s medical office building (MOB) market posted 222,852 square feet of positive net absorption in the second half of 2022, bringing the year-end total to 867,341 square feet. The vacancy rate fell over the year from 12.3% to 11.9%. Houston’s MOB inventory increased annually, adding 784,270 square feet of new inventory. There is 2.7 million SF of MOB space under construction. The average asking NNN rental rate rose annually from $23.30 per SF in Q4 2021 to $23.93 per SF in Q4 2022. Transaction volume increased on an annual basis. According to our data provider Revista, the 2022 total transaction volume is just over $1.24 billion and the average CAP rate is 4.92%.

Market Indicators

2022_Second Half_Healthcare_Market Indicators 

Historic Comparison- MOB only

 2022_Second Half_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_Second Half_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
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_Second Half_Healthcare_Fresenius Dialysis
 Lease Expansion/Renewal*
Houston Methodist Hospital
4501 Magnolia Cove Dr
Kingwood | 23.3k SF
Fresenius Dialysis Center
8303 Creekbend Dr
Southwest Beltway 8 | 11.2K SF 

Executive Summary

Commentary by Beth Young, CCIM, LEED AP

The evidence for the 2022 Houston healthcare market revealed a strong desire by investors for quality medical office buildings even though the fourth quarter presented a distinct reduction in transaction volume and an increase in interest rates. The year produced 51 medical office building (MOB) sales transactions, with 17 properties located oncampus and 34 off-campus for a total of 3,099,797 square feet. The transaction volume was up 194.8% for a value of $1.242 billion, heavily influenced by the 17 transactions (both on- and off-campus) in the Houston market that was part of the Healthcare Realty Trust (HR)/Healthcare Trust of America (HTA) deal which closed in August. Over the last trailing twelve months (TTM) ending January 31, 2023, transactions averaged $407.33 per SF compared to approximately $375.00/SF in 2021. The REITs’ transactions also influenced the cap rates, which fell to an average of 4.9% (dropping from 6.25% in the first six months of 2022).

Only five sales transactions were completed in the fourth quarter, indicating that the lending challenges slowed healthcare real estate activity, making it difficult for developers and investors to obtain debt and close transactions until economic conditions stabilize enough to satisfy lenders and borrowers. Many investors see this as a buying opportunity since cap rates have not been this high since 2010 and 2011.

Some are planning to use cash for good opportunities. Most owners who had planned to sell expect to hold their properties temporarily, hoping interest rates and cap rates will drop again soon so they can achieve the higher prices they witnessed one year ago.

Studies show that because older citizens will require nearly 50% more medical services in the next ten years, up to a third of hospital revenue activity will continue to move off-campus to ambulatory surgery centers (ASCs), office-based labs, and other medical-office sites to provide convenient, local access to major medical providers. Statistics indicate that there is insufficient square footage available to accommodate the significant growth seen in the healthcare real estate sector, with the rate of absorption almost outpacing new product deliveries. Houston currently has the most healthcare properties under construction of any city in the U.S., but only off-campus construction was completed during 2022. Of the almost 43.5 million square feet of medical office buildings (MOBs) in the metro area, 784,270 square feet (SF) were added last year.

Much of the 523,100 SF of construction started in 2022 occurred in the Texas Medical Center (TMC). In addition to the TMC’s Helix Park and the TMC3 (the $1.5 billion medical research campus expansion), some notable planned projects in the greater Houston area include:

  •  Kelsey Seybold, Clear Lake expands to 116,000 SF with ASC
    and cancer center
  • Kelsey Seybold has seven properties under construction in
    areas throughout the metro
  • Baylor St. Luke’s Health System has renovated O’Quinn
    Medical Tower for $426M with an award-winning cancer
  • UTMB Health League City expands from five to 11 floors
    for a $250M project
  • Saturn Plaza is an 80,000 SF MOB at 18505 Saturn Lane,
    Nassau Bay
  • Memorial Hermann Hospital-Katy expansion of $167M
    includes 100 beds, trauma center, ERs, and MOB
  • San Jacinto Biotechnology Center in Generation Park
    leases 15,000 SF in a new 60,000 SF building
  • Houston Methodist Orthopedics & Sports Medicine, Clear
    Lake, opens 150,000 SF MOB in Nassau Bay
  • HCA Houston Healthcare has a newly renovated property
    in Pasadena that includes a 31-bed rehab facility
  • Moody Neurorehabilitation Institute will open a 64,000 SF
    facility for brain injury rehabilitation
  • Houston Physicians Hospital in Webster expands by
    34,800 SF to nearly 84,000 SF with four more ORs
  • HCA Houston Healthcare-Tomball renovations to the postpartum
    space will be valued around $19 million
  • Levit Green’s first signed tenant is Sino Biological Inc. – a
    10,000 SF biotech company based in China
  • Orion Medical is constructing a 50,000 SF MOB and ASC at
    Gulfpoint Business Park

With newly constructed medical properties and physicians desiring modern facilities that demonstrate updated design trends and better patient experiences, lease rates have continued to increase. Houston healthcare property landlords started the year at an average annual NNN rate of $22.43 per SF and had no problem increasing it to $23.93 per SF for a 2.5% growth rate by the end of December. Depending on the quality and location of the properties, MOB NNN rental rates ranged from $17.00 per SF on the low end to $33.56 per SF on the high-end. Based on demographics and healthcare trends, expect these rates to keep climbing. Stable tenants would benefit from locking in comfortable rates for long-term leases.

Most economists and CRE experts expect the economy to experience a mild recession later this year. As a result, healthcare is expected to remain a favored property type, even though many sales will be delayed until late in 2023 or early 2024. Distressed assets will be challenged upon debt maturity; many owners will be unable to put more capital into their assets, forcing a return of their keys to the bank. Some investors will see this as the perfect opportunity to use the cash they have been saving for purchases of value-add and distressed properties. They are prepared and waiting to
renovate those MOBs and put them back on the market for new medical tenants.


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

2022_Second Half_Healthcare_SRI_1024x972

2022 | Second-Half Houston Healthcare Market Report

Download Report
Related Experts

William Uhalt

Research Analyst | Houston


William works alongside the Colliers research team as a research analyst.  He is responsible for maintaining internal databases and directly supporting the industrial, office, retail and multifamily brokerage divisions. William also provides in-depth market analysis on an as-needed basis for individual properties and regional locations.  In addition, William helps track local market conditions to assist in the quarterly reporting process.  Beyond that, he helps to integrate various SaaS platforms with existing internal databases to further aid brokers and drive efficiencies. 

William earned 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 research, knowledge of the industry and capabilities with commercial real estate tools.

Prior to joining Colliers, William earned his BBA with a concentration in real estate from The George Washington University and spent time learning the property management side of the business through an internship at Hines in Washington, D.C. 

View expert

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. 

View expert

Charles Herder

Chairman Emeritus


Mr. Charles Herder is a principal shareholder and Chairman Emeritus of Colliers in Houston. He also has served on the Colliers International Board of Advisors, providing governance and leadership to Colliers nationwide.

Throughout his career, Mr. Herder has assisted a broad range of clients with their real estate needs. He combines an engineering background and strong skills in financial analysis with more than 35 years of experience to help his clients achieve their real estate goals. He has completed major assignments in the fields of office leasing, industrial sales/leases and investment sales. As his practice has matured, he has taken select consulting assignments and advisory roles in helping his clients plan for the future. Most recently, Mr. Herder has been involved in major investment sales involving complex structures and subtle negotiations, adding substantial value for his clients.  He enjoys the real estate profession and remains active. One of his greatest joys is to see the firm he joined when there were only four members, now eclipsing 175...the families supported by this firm, the children growing up, the new associates joining...all gives a sense of sincere satisfaction to his life.

View expert