Houston’s Medical Office Building Market Slows but Fundamentals Remain Steady
Key Takeaways
- Positive absorption continues
- Occupancy improves
- New deliveries drop
- Construction up
Houston MOB Highlights
Activity in Houston’s medical office building (MOB) market slowed in the first half of 2025, with net absorption of 342,580 SF down 40.1% compared to the second half of 2024 and down 60.4% from the same time last year. However, the occupancy rate rose 60 basis points to 89.8% from the second half of 2024 and is also up from 88.6% year over year. Deliveries dropped to 90,532 SF from the 936,633 SF completed in the first half of 2024. Houston-area construction remained No. 3 in the top 50 MOBs nationally for square footage underway, increasing to 1.2M SF from 984,727 SF year over year. Asking rents continue to climb, with the average asking NNN rental rate now at $24.15 PSF, up from $23.70 at year-end 2024 and $23.27 at mid-year 2024.
Executive Summary
Houston’s medical office building (MOB) sector continues to be a cornerstone of the metro’s healthcare landscape, fueled by robust demand and sustained institutional and private investment.
Strong leasing activity has kept pace with new deliveries, pushing occupancy higher both quarter over quarter and year over year. Over the past 12 months, occupancy surged 120 basis points to 89.8%, supported by both a positive net absorption of 342,580 square feet – outpacing the 90,532 square feet of new deliveries – and a growing construction pipeline.
RevistaMed, a national medical property database provider, shows Houston maintaining its No. 3 ranking for MOB square footage under construction among the Top 50 markets and ranked at the No. 4 spot for year-over-year net absorption.
Key developments driving growth
Growth remains anchored by strategic expansions from major hospital systems and medical groups, both on- and off-campus.
- University of Texas MD Anderson Cancer Center – The largest project to break ground in 2025 is a 470,000-squarefoot facility in Sugar Land, set to open in 2029. This will be MD Anderson’s largest Houston-area location to date, featuring an ambulatory surgery center, expanded diagnostic imaging, radiation oncology, outpatient procedural services, and multidisciplinary clinics to support comprehensive cancer care.
- Kelsey-Seybold – Two new clinics are underway: a 51,871-square-foot facility at 11225 W. Grand Parkway S. near the Aliana community in Richmond, and a 119,682-square-foot Northwest Campus Hub at 19926 Northwest Freeway. Both are slated for completion in 2025. Kelsey-Seybold also announced plans for another facility in the Fort Bend Town Center project in Missouri City.
- Houston Methodist – Three projects are in progress, including two in partnership with Legacy Community Health: a 40,000-square-foot facility in Pasadena to be completed October 2025 and a 26,200-square-foot facility in Acres Homes to be completed in 2026. Additionally, a 65,000-square-foot comprehensive care center has been announced to be built in Cinco Ranch.
- Memorial Hermann – This hospital group is expanding its Cypress campus with a 100,000-square-feet building and adding 135,466 square feet in its fifth building in The Woodlands. A 51,000-square-foot MOB/freestanding ER in Bridgeland is also underway, targeted for completion in 2026.
Houston MOB Sales Activity
Medical Office Building sales activity slows in 2025
The first half of 2025 highlights a shifting investment landscape for Houston’s medical office building (MOB) sector – one marked by reduced deal flow, pricing pressure and selective investor activity – but still anchored by significant trades in prime locations.
MOB investment activity slowed with both the number of transactions and overall sales volume declining from the pace set in 2024. The first half of 2025 recorded just 18 sales totaling $113.3 million, representing a 53.2% drop from the 26 sales worth $242.4 million closed during the same period in 2024. When measured against the second half of 2024 – when 22 sales generated $266.5 million – the current totals reflect a 57.5% decline in dollar volume, underscoring the market’s cooling momentum.
Pricing trends further illustrate this pullback. The average sales price per square foot settled at $170 in the first half of 2025, falling 34.4% from the $259 average recorded at the end of 2024, and down 46.7% below the $319 average just one year earlier.
While pricing retreated, capitalization rates fluctuated and ranged between 6.5% and 7.4% during the past 18 months. This movement reflects both changing investor sentiment and broader capital market adjustments.
Despite the overall slowdown, several transactions signaled continued demand for quality assets. Among the most notable:
- Lonza Houston acquired Pearland Kirby Medical Plaza, a three-story, 44,579-square-foot facility at 15015 Kirby Drive in Pearland. The global biopharmaceutical manufacturer also demonstrated its long-term commitment to the area by renewing its 276,770-square-foot lease at 14905 Kirby in late 2024.
- Healthcare Realty Trust sold Cypress Station Medical Building, a 52,040-square-foot, three-story property at 1140 Cypress Station Drive, which was acquired by a private investor.
- Capital Realty Group expanded its Houston footprint with the purchase of Houston Medical Center, a 10-story, 126,906-square-foot building at 6655 Travis Street, also purchased from Healthcare Realty Trust.
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