In 2025, medical office building (MOB) cap rates typically range from 5.5% to 7.0%, depending on location, tenant credit quality, lease structure, and proximity to a health system campus.
Why It Matters
Cap rates — short for capitalization rates — are the primary metric investors use to assess the value and risk of a commercial real estate asset. For health system executives, understanding where MOB cap rates sit in the current market directly affects decisions around asset monetization, sale-leaseback transactions, and capital recycling strategies.
When a health system considers selling or leasing a medical office building to free up capital, the cap rate determines what price the market will assign to that asset. A lower cap rate signals higher investor demand and stronger asset value. In 2025, MOBs remain among the most sought-after commercial real estate assets, which is keeping cap rates compressed relative to general office product, where cap rates often exceed 8.0% or higher in struggling markets.
How It Works
A cap rate is calculated by dividing a property’s net operating income (NOI) — annual revenue minus operating expenses — by its current market value or sale price. For example, a MOB generating $800,000 in NOI valued at $13.3 million reflects a cap rate of approximately 6.0%. This simple formula gives investors a quick read on expected return before financing costs.
In practice, cap rates for MOBs in 2025 are stratified by asset quality. Class A on-campus MOBs leased to investment-grade health systems — such as a major health system in Indianapolis, IN — tend to trade at the low end of the range, between 5.5% and 6.0%. Off-campus MOBs with shorter lease terms or independent physician tenants typically price between 6.5% and 7.0%, reflecting higher perceived risk. Buildings under 10,000 square feet or with near-term lease expirations may see cap rates push above 7.0%, depending on the submarket.
Key Considerations
Lease structure is one of the most influential variables in MOB cap rate compression. Triple-net (NNN) leases — where the tenant pays property taxes, insurance, and maintenance — are highly preferred by institutional investors and command the lowest cap rates. Gross leases or modified gross structures shift more expense risk to the landlord and are typically priced at a 25 to 75 basis point premium above comparable NNN deals.
Tenant credit quality matters significantly. MOBs anchored by large health systems or academic medical centers carry investment-grade credit in the eyes of the capital markets. A single-tenant MOB occupied by a regional health system under a 10- to 15-year NNN lease is among the most liquid and aggressively priced healthcare real estate assets available today. Conversely, multi-tenant buildings with a mix of independent specialists, urgent care operators, or behavioral health providers may require more underwriting and price accordingly.
Interest rate environment also plays a role. As of 2025, with the federal funds rate gradually moderating from its 2023 peak cycle, borrowing costs for MOB acquisitions have eased slightly, supporting transaction volume. However, debt service coverage requirements remain a real constraint, and buyers are underwriting deals more conservatively than in the 2020–2022 period when cap rates for NNN assets leased by institutional grade credit tenants compressed to historical lows near 4.5% to 5.0%.
Actionable Takeaway
Health system CFOs and strategy officers evaluating a potential MOB sale or monetization should commission an independent valuation before entering any transaction process. Knowing your building’s NOI, current lease terms, and tenant mix will allow you to benchmark against live market cap rates and avoid leaving capital on the table. If your MOB is on-campus, long-term leased, and occupied by your own system, you may hold an asset that trades at the most favorable end of the cap rate spectrum — a strategic advantage worth quantifying.
For health systems seeking to understand how their facility portfolios intersect with capital strategy, the healthcare real estate advisory services available through a dedicated healthcare real estate firm can provide the market intelligence needed to make informed decisions. Practical tip: review lease expiration schedules across your MOB portfolio now — assets with seven or more years of lease term remaining are positioned to achieve the most competitive pricing in today’s market.
Health system executives ready to assess their real estate position can schedule a strategic consultation to evaluate current market conditions against their specific portfolio. And for a broader overview of how healthcare real estate advisory intersects with capital planning, the Bremner Healthcare Real Estate homepage outlines the full scope of services available to health systems navigating complex asset decisions.
Bremner Healthcare Real Estate partners with health systems to align real estate strategy with clinical performance and capital efficiency.
What is a cap rate in the context of medical office buildings?
A cap rate, or capitalization rate, is a formula used to estimate the return on a real estate investment by dividing the property’s net operating income by its market value or purchase price. In the medical office building sector, cap rates serve as a quick benchmark for comparing asset value across different markets, lease structures, and tenant profiles. A lower cap rate generally reflects a higher-quality asset with stable, long-term tenancy and lower perceived investment risk.
How do MOB cap rates compare to traditional office building cap rates in 2025?
Medical outpatient buildings (MOBs) consistently price at lower cap rates than traditional commercial office assets, reflecting stronger investor demand and more resilient occupancy performance. In 2025, general office cap rates in many markets exceed 8.0% or higher due to elevated vacancy rates and remote work trends, while MOBs remain in the 5.5% to 7.0% range. This spread of 100 to 150 basis points or more reflects the healthcare sector’s relatively stable demand fundamentals and the essential nature of outpatient medical services.
Does building location affect a MOB’s cap rate?
Location is a primary driver of cap rate differentiation in the MOB sector. On-campus buildings adjacent to hospital systems — particularly those in growing metropolitan markets like Indianapolis, IN — typically command cap rates at the lower end of the spectrum due to proximity to patient referral infrastructure and health system credit support. Off-campus or suburban MOBs in secondary or tertiary markets may price at higher cap rates to compensate investors for lower liquidity and potentially thinner tenant demand.
What lease terms help a health system achieve the best MOB sale price?
The most favorable MOB sale prices are typically achieved when a health system can offer a long-term triple-net leaseback arrangement, ideally with 10 to 15 years of remaining term at the time of sale. Investors price certainty of income above nearly all other factors, and a health system with strong credit that commits to a long-term occupancy agreement effectively reduces the buyer’s risk, compressing the cap rate and increasing the asset’s valuation. Buildings with lease terms under five years or near-term expirations will face measurably higher cap rates and more limited buyer pools.
How should health system executives use cap rate data in strategic planning?
Health system executives should treat cap rate benchmarks as a planning input when evaluating whether to hold, sell, or recapitalize real estate assets. Understanding current market cap rates allows CFOs and strategy officers to calculate the implied market value of their MOB portfolio and compare that against the cost of maintaining ownership, the opportunity cost of tied-up capital, and the system’s broader capital deployment priorities. Engaging a healthcare-exclusive real estate advisor ensures that cap rate analysis is contextualized within the health system’s clinical strategy and long-term facility roadmap rather than evaluated in isolation.
