Vital Signs: 2025 Healthcare Update

Construction Activity Trends Down New starts are at a cyclical low.

MOB LEASING

• New medical outpatient building construction has slowed significantly from recent highs. As of the third quarter, inventory under construction as a percentage of total inventory is 2.4%, totaling nearly 21 msf. This activity is down from a year ago when it totaled 3.0%, or 26 msf, during the third quarter of 2023. This activity is also below the recent high of 3.1% and lower still than the prior cycle high of 3.7%. • New starts have trended lower in 2024, totaling just 1.5 msf in the third quarter. This quarterly activity was down 10% QOQ and 20% lower than the third quarter of 2023. • Declining construction activity gives the market some time to absorb existing new product. However, with low vacancy rates, additional new deliveries will be needed to address the demand. Increased costs, coupled with a high-interest-rate environment has dampened some construction activity. However, with expectations of declining interest rates, additional projects may be given the green light.

30

4.0%

27

3.5%

24

3.0%

MSF

21

2.5%

18

2.0%

15

1.5%

2017 Q1

2021 Q1

2018 Q1

2016 Q1

2019 Q1

2017 Q2

2021 Q2

2022 Q1

2017 Q3

2021 Q3

2023 Q1

2018 Q2

2018 Q3

2016 Q2

2019 Q2

2016 Q3

2019 Q3

2017 Q4

2021 Q4

2024 Q1

2018 Q4

2020 Q1

2016 Q4

2019 Q4

2022 Q2

2022 Q3

2023 Q2

2023 Q3

2022 Q4

2024 Q2

2023 Q4

2024 Q3

2020 Q2

2020 Q3

2020 Q4

Under Construction

UC as % of Inventory (RHS)

Source: Revista Med (based on Top 50 Markets, 7,500+ sf MOBs), Cushman & Wakefield Research

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