Medical Real Estate Market Trends 2026: Q2 Report for Physician-Owners

The medical real estate market in 2026 is sending a clear signal to physician-owners: institutional capital wants what you own. Investment volume is up sharply, occupancy is tightening, rents are at record highs, and the supply of new buildings is declining. For physicians who own medical office buildings, ambulatory surgery centers, or other clinical facilities, this is the market environment that produces premium sale and sale-leaseback pricing.

This report synthesizes the key trends shaping the physician-owned medical real estate market through Q2 2026, with a focus on what the data means for owners considering a sale, sale-leaseback, or retained equity transaction.

Investment Volume: Capital Is Returning to Healthcare Real Estate

Medical outpatient building investment volume reached $2.7 billion in Q2 2026 alone — 24% above the same quarter last year and 11% above the five-year average. On a trailing four-quarter basis, total volume stands at $14.4 billion, representing a 77% increase year-over-year. This is not a quiet market.

The surge in volume reflects a broad-based return of institutional capital to healthcare real estate after the rate-driven pause of 2023 and early 2024. As interest rates have stabilized and buyers have repriced their underwriting, transaction velocity has accelerated sharply — particularly for the kinds of physician-owned assets CREG represents.

For physician-owners, what this volume surge means in practice is a deeper, more competitive buyer pool. Properties that might have attracted two or three offers in 2023 are now generating five to eight. That competitive pressure translates directly into better pricing and more favorable lease terms in sale-leaseback structures.

Cap Rates: Stable Pricing Supports Seller Confidence

Average MOB cap rates moved just 4 basis points year-over-year, settling at approximately 7.1% nationally. This stability is significant — after the sharp cap rate expansion of 2022 and 2023, the market has found a floor. Sellers no longer face the risk of pricing declining between engagement and closing.

Rents: Record Highs Create the Best Sale-Leaseback Window in Years

Average NNN asking rents reached a record high of $25.46 per square foot nationally in Q2 2026, up 1.3% year-over-year. For physician-owners contemplating a sale-leaseback, this matters enormously — because your sale price is a direct multiple of your rent.

In a sale-leaseback, the buyer purchases your building and you sign a long-term lease to remain in place. The lease rent is the primary input to the valuation. When market rents are at record highs and buyers are accepting tight cap rates, the combination produces the highest sale-leaseback proceeds we have seen since 2021.

The markets showing the highest rents — San Jose ($42.21), San Francisco ($40.81), Los Angeles ($37.17), Miami ($31.54), and New York ($30.80) — are commanding premium sale-leaseback proceeds. But even secondary and Sun Belt markets are seeing strong rent growth: Salt Lake City up 8.1% year-over-year, Orange County up 7.8%, Tampa up 4.7%.

Supply Constraints: A Structural Tailwind for Sellers

One of the most important dynamics in the 2026 medical real estate market is the supply picture. New construction completions have declined for four consecutive quarters, running 76% below the five-year quarterly average. The total pipeline of space under development has fallen 10% year-over-year to 18.9 million square feet.

The reason is straightforward: construction costs have surged dramatically. New MOB construction now runs $350 to $720 per square foot depending on market and building type, up nearly 60% at the high end from 2021 levels. Outpatient surgery centers run $450 to $650 per square foot. At these costs, new development is penciling in very few markets.

What this means for existing property owners is significant: your building is increasingly difficult to replace. As replacement costs rise and new supply falls, the scarcity value of well-located, existing medical facilities increases. Buyers and appraisers are both recognizing this — it is one of the factors keeping cap rates stable despite elevated interest rates.

Who Is Buying: The Physician-Seller's Buyer Universe

Understanding who is actively acquiring physician-owned medical real estate in 2026 helps clarify how to position your property and which buyer types to prioritize in a competitive process.

The most recent data shows private investors account for 56.9% of all healthcare real estate buyers year-to-date in 2026, with institutional buyers representing another meaningful share. REIT participation, while present, has moderated from 2024 peak levels — consistent with the pattern we observe in our own deal flow, where REITs are primarily acquiring portfolios assembled by institutional platforms rather than individual physician-owned properties.

For physician-sellers, the practical implication is that your most active buyers are PE real estate funds and private high-net-worth investors — not healthcare REITs directly. REITs set the pricing benchmarks that PE buyers underwrite to, but the transaction counterparty for most physician-owned MOBs and ASCs will be a private or institutional fund buyer.

Top Markets for Physician-Owned Medical Real Estate

Investment activity is not uniform across the country. The Southeast led all regions on a trailing four-quarter basis with $4.0 billion in transaction volume, followed by the West at $3.2 billion and the Midwest at $2.5 billion. Within those regions, specific markets are commanding the most buyer attention.

Atlanta's 102% year-over-year increase in investment volume is particularly notable for the Southeast market. Chicago's 186% surge reflects the depth of institutional demand in major Midwest markets. Los Angeles continues to command the highest transaction volumes, with individual assets trading above $1,000 per square foot in premium submarkets.

The Sale-Leaseback Window: Why 2026 Is a Strong Time to Act

For physician-owners weighing a sale-leaseback, the current market offers a combination of conditions that rarely align simultaneously:

• Record rents maximize the sale price derived from your lease
• Stable cap rates mean pricing isn't moving against you during the transaction
• Deep buyer competition supports multiple offers and negotiating leverage
• Constrained new supply makes your existing facility increasingly scarce and valuable
• Rising replacement costs create a pricing floor that supports your valuation

The one headwind is the interest rate environment — buyers are financing at higher rates than 2020 and 2021, which is why average cap rates are 7.1% rather than 5.5%. But with rates expected to ease gradually, there is a scenario where cap rates compress further over the next 12–24 months. Physicians who are ready to transact today should not wait on that forecast — the bird-in-hand value of current pricing is real, and the downside scenario (rates rise again) would push cap rates higher and values lower.

What the Private Equity Pullback Means for Your Real Estate

Healthcare private equity deal volume declined to 131 transactions in Q2 2026, down from a peak of 160 in Q2 2024. This moderation in PE practice acquisition activity has a direct implication for physician real estate owners: the window of coordinated practice-and-real-estate transactions has narrowed, but it has not closed.

Physicians who were approached by PE buyers for their practices in 2021–2024 and did not transact are in a different position today. Many still own their real estate. The practice sale that seemed imminent may no longer be on the table — but the real estate remains, and in many cases represents the majority of the physician's net worth tied to their practice.

For these owners, a standalone real estate sale or sale-leaseback — independent of any practice transaction — is often the most actionable path to liquidity. The real estate market does not care whether a PE buyer is interested in your practice. It cares about your lease, your location, and your tenant credit — all of which physician-owned facilities in good markets typically have in abundance.

Key Market Indicators at a Glance

What This Means If You Own a Medical Building or Surgery Center

The data points in one direction: physician-owners who are considering a sale or sale-leaseback within the next two to three years are operating in a favorable market. The combination of record rents, stable cap rates, rising buyer demand, and constrained new supply creates conditions where well-positioned assets can achieve premium outcomes.

The practical steps for owners who want to understand their position:

• Get a current broker opinion of value. Market conditions have changed enough in the past 18 months that valuations from 2024 or earlier are likely stale. Understanding what your building is worth today, with current rent and cap rate assumptions, is the starting point for any decision.
• Review your lease structure. If you own your building and practice in it without a formal lease, or with a below-market or short-term lease, addressing this before going to market is the highest-leverage step available to you. A well-structured lease can add 20–30% to your sale proceeds.
• Consider timing relative to your practice plans. The optimal time to sell or leaseback your real estate is before your practice transition, not during or after it. The physician who sells their building while they are still a stable, creditworthy tenant commands materially better pricing than the physician who waits until succession is underway.
• Run a competitive process. The 77% surge in investment volume means there are more active buyers than at any point in the past three years. A properly run competitive process — reaching 15 to 20 qualified buyers — consistently outperforms direct or off-market transactions.