Why Real Estate is the Foundation of Wealth Creation
March 13, 2024
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The national average price per square foot for medical office buildings (MOBs) reached $296 in the first half of 2023, and occupancy rates have remained steady at 91.5%–92.5% for over a decade, indicating that demand for this asset class remains strong.
Investors recognize the value — stable tenants, long-term leases, and the resilience of healthcare real estate — but with high competition, simply owning a MOB real estate isn’t enough.
Maximizing returns requires strategic execution, from selecting the right properties to optimizing lease structures and capitalizing on market trends. Investors need key investment strategies to help you stay ahead and ensure your MOB investments deliver the best possible returns.
MOBs are purpose-built real estate assets that support healthcare providers. Unlike traditional office spaces, MOBs are equipped with specialized infrastructure — exam rooms, waiting areas, and advanced heating, ventilation, and air conditioning (HVAC) systems — to meet medical professionals' and their patient's unique needs. High-quality soundproofing is also a key feature, ensuring patient privacy and confidentiality.
These buildings are near hospitals, nursing homes, or other healthcare hubs. Some are on-campus, directly affiliated with major hospitals, and benefiting from built-in referral networks. In contrast, others are off-campus, often positioned in suburban or rural areas to serve broader communities.
MOBs are home to various healthcare tenants — physicians, dentists, specialists, and outpatient care providers. While some doctors own their properties, many prefer to lease or sell their real estate to focus on patient care. This creates substantial investment opportunities for real estate groups and investors seeking stable, long-term tenants.
Investing in medical office real estate is a powerful wealth-building strategy — offering stable tenants, long-term leases, and consistent cash flow. But to truly maximize returns, you need an innovative approach.
In real estate, location is everything — MOBs are no exception. High-visibility areas with easy access to major roads and public transportation attract more patients and top-tier healthcare providers.
To find the best investment opportunities, conduct a detailed demographic analysis. Look for:
A well-located MOB with a diverse mix of healthcare providers creates a built-in referral network — driving patient volume and ensuring long-term occupancy.
Our blog “How To Perform Commercial Property Market Analysis” can help significantly.
The proper financing structure makes all the difference in your cash flow and long-term profitability. MOB investors have multiple options, including:
Partnering with lenders who specialize in healthcare real estate can provide better loan terms and valuable market insights. Smart financing leads to higher return on investment (ROI).
A well-managed MOB attracts sticky, high-credit tenants — translating to long-term income stability. Key strategies include:
Tenant retention is key — when healthcare providers set up shop, they rarely move. Keeping your property in top condition ensures steady income and minimizes vacancies.
Investing in innovative capital improvements enhances both functionality and appeal. Prioritize:
These upgrades not only increase rental rates but also boost overall property value.
Every investment carries risk, but savvy investors know how to protect their assets. Key risk mitigation strategies:
By taking a proactive approach to risk management, you safeguard your investment and set yourself up for consistent long-term returns.
MOBs have consistently outperformed other asset classes due to long-term tenant stability, recession resistance, and increasing demand for healthcare services.
Historically, MOBs have proven recession-resistant. During the 2008 financial crisis, while many commercial real estate sectors struggled with declining occupancy and rent reductions, MOBs retained over 90% occupancy rates, as healthcare providers remained operational to meet essential patient needs. Even during the COVID-19 pandemic in 2020 and 2021, 90% of healthcare real estate firms reported that their occupancy rates remained stable or increased, highlighting the sector’s reliability.
The demand for healthcare services continues to rise, fueled by aging demographics, population growth, and advancements in medical technology. The 65-plus age group — the largest consumers of healthcare services — is projected to grow from 58 million in 2022 to over 80 million by 2040. This aging population drives sustained demand for outpatient care, specialty medical services, and long-term care facilities, making MOB investments one of the most secure and future-proof opportunities in commercial real estate.
With long-term leases, strong tenant retention, and growing demand, MOBs offer investors a consistent income stream and a hedge against market volatility. This combination of historical resilience and future growth potential makes MOBs one of the most reliable investment classes in commercial real estate today.
MOBs are built for resilience. Unlike traditional office spaces that struggle during downturns, MOBs thrive due to the essential nature of healthcare. The aging baby boomer population is fueling long-term demand for outpatient services, while the shift toward preventive healthcare, wellness services, and specialized treatments is increasing the need for well-located medical facilities.
While telemedicine has grown, in-person visits for diagnostics, procedures, and treatments remain essential, reinforcing MOBs as a must-have asset. MOBs offer superior tenant retention, higher occupancy rates, and more predictable income streams than general office spaces, making them a safe-haven investment during economic uncertainty.
Tax benefits are a massive advantage for MOB investors looking to optimize cash flow and reduce taxable income. The Tax Cuts and Jobs Act of 2017 allows eligible MOB owners to take advantage of accelerated or bonus depreciation, leading to more significant upfront tax deductions.
This allows investors to offset gains from other assets, improving portfolio-wide tax efficiency. Early tax benefits free up capital for those who qualify, making it easier to expand their real estate holdings faster. Savvy investors use this advantage to scale their portfolios while maintaining healthy cash flow.
To learn more about real estate tax strategies, read our blog: “Commercial Real Estate Taxation: Tax Strategies for CRE Investors.”
The fundamentals of MOB leasing create predictable, long-term revenue streams — a significant advantage for investors seeking stability. Healthcare providers — physicians, dentists, and specialists — typically have high creditworthiness and financial stability, making them reliable long-term tenants.
MOBs near hospitals, healthcare hubs, and referral networks attract quality tenants who rely on patient flow and provider collaboration. Additionally, medical tenants rarely relocate due to the high moving equipment, infrastructure, and patient retention costs. This results in higher lease renewal rates and fewer vacancies, ensuring strong occupancy and stable rental income.
For investors looking to diversify their real estate portfolios, MOBs provide a powerful hedge against market volatility. MOBs house a variety of healthcare providers, from primary care physicians and dermatologists to imaging centers and surgical specialists.
A diverse tenant base protects against income disruptions if one provider leaves, ensuring financial stability. Additionally, the referral ecosystem within MOBs creates built-in demand, increasing tenant longevity and overall property value. Unlike traditional office buildings, MOBs aren’t affected by remote work trends and continue to benefit from the growing need for healthcare services.
Medical office buildings are one of the most stable, high-performing asset classes. The demand for healthcare isn’t going anywhere, and the right investment strategy can set you up for consistent cash flow, long-term appreciation, and serious wealth-building opportunities.
With over 28 years of experience in commercial real estate investing, my firm has acquired and managed billions in assets, specializing in medical office buildings and essential real estate investments that generate consistent cash flow and long-term value.
If you’re serious about investing in stable, high-performing commercial real estate, let’s connect.
