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Despite many corporations pushing to "RTO," or return to office, commercial office landlords still struggle to keep existing tenants or attract new ones. A 2024 CommercialEdge report found that almost 1 in 5 offices nationwide were vacant at the end of 2023—but one sector is bucking the trend: health care.
Demand for medical offices has historically been stable and resilient, even in economic downturns, according to CBRE Investment Management. People still get sick and need care for ongoing or chronic issues, no matter the economic climate.
During the COVID-19 pandemic, demand for medical office space stayed at pre-pandemic levels. At the end of 2023, the medical office vacancy rate for the top 100 largest metro areas was only 7.25% in the fourth quarter of 2023, per Revista.
The Census Bureau listed health care as one of the industries with the lowest rates of work-from-home employees in 2021, alongside other hands-on industries such as manufacturing and agriculture.
Although telehealth appointments increased significantly during the pandemic, many medical procedures and examinations still inherently require in-person interaction or specialized equipment. In early 2023, the real estate and investment management firm JLL reported that by the end of 2022, nearly 9 in 10 medical visits were in person; the remaining 10% occurred via telehealth, down from 54% during the pandemic.
With an aging U.S. population increasingly able to participate in affordable health insurance plans, residents will require—and be able to access—more medical services, creating an even higher demand for medical office space.
Financial experts continue to expect health care real estate to generate a strong return on investment, and medical practitioners and hospital systems are often considered ideal renters, as they are more likely to stay put after investing time and money into retrofitting a location to meet its needs.
Soundry Health examined Revista data to see which parts of the country had the lowest medical office vacancy rates at the end of 2023.
The metropolitan areas ranked include the cities and their surrounding towns and suburbs and are based on the percentage of medical offices tenants occupy in each metro. About half the cities are located in states experiencing marked population growth, leading to increased demand for medical services and real estate.
- Occupancy rate: 96.0%
-- Total medical office space: 1.5M square feet
-- Under construction: 120.0K square feet
-- Average rent: N/A
- Occupancy rate: 96.0%
-- Total medical office space: 6.7M square feet
-- Under construction: None known
-- Average rent: $18.67 per square foot
- Occupancy rate: 96.1%
-- Total medical office space: 3.3M square feet
-- Under construction: None known
-- Average rent: $21.13 per square foot
- Occupancy rate: 96.1%
-- Total medical office space: 3.6M square feet
-- Under construction: None known
-- Average rent: $22.76 per square foot
- Occupancy rate: 96.2%
-- Total medical office space: 3.4M square feet
-- Under construction: 551.7K square feet
-- Average rent: $19.32 per square foot
- Occupancy rate: 96.3%
-- Total medical office space: 3.7M square feet
-- Under construction: 215.0K square feet
-- Average rent: $14.95 per square foot
- Occupancy rate: 96.3%
-- Total medical office space: 3.5M square feet
-- Under construction: 138.5K square feet
-- Average rent: $20.45 per square foot
- Occupancy rate: 96.4%
-- Total medical office space: 3.7M square feet
-- Under construction: 21.6K square feet
-- Average rent: $24.01 per square foot
- Occupancy rate: 96.5%
-- Total medical office space: 3.2M square feet
-- Under construction: 20.0K square feet
-- Average rent: $29.42 per square foot
- Occupancy rate: 96.7%
-- Total medical office space: 1.8M square feet
-- Under construction: 198.9K square feet
-- Average rent: $15.46 per square foot
Story editing by Shannon Luders-Manuel. Copy editing by Paris Close. Photo selection by Ania Antecka.
This story originally appeared on Soundry Health and was produced and distributed in partnership with Stacker Studio.
