Physician Practices in Transition: Consolidation, Capital, and the Future of Healthcare Delivery
The Tenant Is Changing. Most Leases Haven’t Caught Up.
The independent physician practice is no longer the default tenant in medical office. That shift already happened. What the market has not absorbed yet is what it means for how space gets leased, owned, and underwritten.
Colliers’ Q32026 Report, Physician Practices in Transition: Consolidation, Capital, and the Future of Healthcare Delivery, lays out the numbers. The share of physicians in private practice fell from 60.1% in 2012 to 42.2% in 2024. By 2022, roughly 74% of physicians were employed by a hospital system or corporate entity. Between 2019 and 2022, corporate ownership of practices grew nearly 10 times faster than hospital ownership.
Read that last figure again. The fastest-growing decision maker in physician real estate is not the health system. It is private equity, insurers, and multi-practice corporate platforms. They evaluate space differently, commit differently, and leave differently.
Why Physicians Are Selling
The report is direct about cause. Inflation-adjusted Medicare physician payments dropped 33% from 2001 to 2025. Practice costs rose 3.5% in 2025 alone while Medicare cut another 2.8%. Among physicians who sold in the last decade, 70.8% cited inadequate payment rates as an important reason, and 64.9% cited the need for access to capital and resources.
This is not a cyclical squeeze. It is a structural one, and it falls hardest on the physician nearing retirement. More than 40% of active physicians will reach 65 within ten years. For many of them, a sale is the only realistic exit, and the buyer is increasingly a platform rather than a younger partner.
Meanwhile, demand keeps climbing. The 65 and older population is projected to grow 39% between 2020 and 2035, and the 75 and older cohort by 74%. Fewer independent physicians, more patients, and more capital chasing the gap. That combination guarantees consolidation continues.
Where the Capital Is Going
Physician medical groups accounted for a record 46% of first-quarter 2026 healthcare deal volume, up from 37% a year earlier. PE groups were responsible for 65% of physician practice acquisitions from 2019 to 2023. Many platforms have completed more than five acquisitions; some have completed 20.
The target list is telling: dermatology, ophthalmology, gastroenterology, and primary care. These are office-based, procedure-heavy, fragmented specialties. In other words, they are medical office tenants. Every roll-up in those specialties is a real estate event, whether or not anyone treats it like one at closing.
The report also notes growing selectivity. Deal counts are falling while capital stays concentrated in assets with strong margins and scalable operations. Buyers are writing fewer checks and taking longer to do it. That discipline will show up in how they approach occupancy costs.
What This Means for Real Estate
The report’s implications section covers demand for larger, technology-enabled space, standardized layouts, and MSOs as a distinct occupier class. All accurate. Here is how it plays out on the ground.
1. The decision maker moves upstream. When a practice sells, the physician who signed the lease rarely controls the next renewal. An MSO or platform real estate team does, often from another city, with a portfolio view and a cost target. Landlords who built relationships with individual doctors will find those relationships matter far less than they assumed.
2. Hold periods and lease terms are misaligned. PE operates on a 3 to 7 year holding period. Medical office leases with heavy tenant improvements typically run 10 years or longer. That mismatch will define negotiations over the next cycle. Expect platforms to push for shorter initial terms, assignment rights that survive a sale, early termination options, and portfolio-level flexibility to consolidate or exit locations. Landlords will push back with credit requirements and guaranties. Whoever understands the platform’s exit timeline holds the leverage.
3. Credit gets harder to read. A 15-location PE-backed dermatology platform looks stronger than a single independent practice. It may not be. The platform’s balance sheet often carries acquisition debt, and the report shows real operating risk: PE-acquired ophthalmology practices saw a 265% increase in physician turnover within three years, and only 44% of physicians at PE-owned practices remained two years post-sale compared with 60% at non-PE practices. Physicians generate the revenue that pays the rent. When they leave, a location can go dark under a lease that still has years to run. Owners underwriting these tenants need to look past the logo.
4. MSOs need office space, not clinic space. Billing, HR, IT, marketing, and facilities management get centralized when practices consolidate. That work lands in conventional office buildings, separate from patient-facing clinics. This is a real and growing occupier segment that general office brokers and landlords mostly overlook because it does not look like healthcare.
5. Standardization changes what “good space” means. Consolidated platforms want repeatable layouts, efficient patient flow, adequate IT infrastructure, and supply logistics that work across dozens of sites. A one-off buildout designed around a single physician’s preferences is now a liability at renewal or resale. Buildings that can accommodate a prototype will lease. Buildings that require custom solutions will discount.
6. The footprint splits in two directions. Platforms will aggregate into larger hub facilities for multi-specialty and procedural care while also adding smaller community locations close to patients. The middle, a mid-sized standalone practice in an aging building, is where vacancy risk concentrates.
What Occupiers Should Do Now
Physician groups considering a sale should treat real estate as a deal term, not an afterthought. Lease assignment provisions, personal guaranties, and any ownership interest in the building directly affect valuation and post-closing liability. Physicians who own their real estate have a separate asset to negotiate, and a sale-leaseback negotiated before the practice transaction often produces a better outcome than one forced after it.
Platforms acquiring practices should audit inherited leases immediately. Expiration dates, renewal options, relocation rights, and assignment restrictions across a newly assembled portfolio usually reveal both risk and opportunity. Consolidating three underperforming sites into one well-located hub is often the fastest margin improvement available.
Health systems competing against these platforms need to recognize who they are bidding against for the same space. Corporate buyers move quickly and price occupancy as an operating expense to be optimized. Systems that still treat site selection opportunistically will lose good locations to buyers with a plan.
Underwrite the Platform
Consolidation is not a trend to monitor. It has already rewritten the tenant roster in medical office. The occupiers that win will be the ones that align real estate commitments with their actual ownership horizon and operating model. The owners that win will be the ones that underwrite the platform, not just the building.
Frequently Asked Questions
How does physician practice consolidation affect medical office leasing?
Physician practice consolidation shifts lease decisions away from individual doctors and toward private equity platforms, management services organizations (MSOs), and health systems that manage real estate at the portfolio level. According to Colliers’ Q3 2026 report, the share of physicians in private practice fell from 60.1% in 2012 to 42.2% in 2024, and corporate ownership of practices grew nearly 10 times faster than hospital ownership between 2019 and 2022. Because PE firms typically hold practices for 3 to 7 years while medical office leases with significant tenant improvements often run 10 years or longer, consolidated tenants increasingly negotiate for shorter initial terms, assignment rights that survive a sale, early termination options, and the flexibility to consolidate or exit locations across a portfolio.
What should physicians consider about their real estate before selling a practice to private equity?
Physicians should treat real estate as a negotiated deal term rather than closing paperwork, because lease assignment provisions, personal guaranties, and building ownership all affect practice valuation and post-sale liability. A physician who signed a personal guaranty may remain liable for rent after control of the practice passes to the buyer unless the guaranty is released or replaced as part of the transaction. Physicians who own their medical office building hold a separate asset, and a sale-leaseback negotiated before the practice sale typically produces better pricing and lease terms than one arranged afterward, when the buyer already controls the occupancy decision.
