Medical office buildings (MOB) are their own discipline within commercial real estate. The tenants are different (healthcare practices, hospital-affiliated specialties, dialysis providers, outpatient surgery), the buildouts are different (imaging suites, surgery centers, dental operatories), the lease structures are different (often CAM-heavy with rolled-in TI), and the long-term performance characteristics differ meaningfully from generic office.
MOB has also been one of the most defensive commercial real estate categories through the past several economic cycles. Healthcare demand is structurally tied to demographics rather than economic cycles, and the build-out investment required by tenants creates renewal stickiness that generic office can’t match.
This page covers what’s distinctive about MOB transactions in Atlanta and the Southeast.
Who This Service Is For
- Medical practice owners selling buildings they occupy and operate
- Investors building MOB portfolios
- Hospital systems divesting or consolidating real estate
- Developers exiting MOB build-to-suit projects
- 1031 exchangers using MOB as replacement property
- Healthcare REITs and institutional buyers (we work with all)
Property Subtypes We Cover
- Single-tenant MOB — typically owner-occupied or single-practice leased
- Multi-tenant MOB — multiple healthcare tenants under a single roof
- On-campus MOB — physically located on or directly adjacent to a hospital campus
- Off-campus MOB — freestanding medical office, typically in suburban locations near patient populations
- Ambulatory surgery centers (ASCs) — outpatient surgery; specialized buildouts
- Dialysis centers — single-tenant DaVita and Fresenius properties on long-term NNN
- Dental and orthodontic — typically multi-tenant or smaller standalone
- Urgent care — increasingly standalone, often on retail-pad locations
- Imaging centers and outpatient services — specialized infrastructure requirements
What’s Distinctive About MOB
Specialty buildouts have real value
A medical office buildout includes far more than office finishes. Operatories with plumbing for dental/medical use, imaging suites with lead-shielded walls, surgery suites with medical gas, ADA-compliant patient flow, separate provider and patient circulation, on-site labs, and specialized HVAC for procedure rooms all represent buildout costs typically running $100–$300+ per square foot — multiples of generic office buildout.
This buildout investment is the primary source of MOB tenant stickiness. A medical practice that has invested $1M in custom operatories does not relocate casually at lease expiration.
Tenant credit is non-obvious
Medical tenants run from investment-grade public healthcare systems (HCA, Wellstar, Emory, Piedmont) and large national operators (DaVita, Fresenius, US Physical Therapy) to small private practices with limited transparency. Underwriting a private medical practice tenant requires evaluating patient volumes, payer mix, partner stability, and competitive position in the trade area — not just financial statements.
On-campus vs. off-campus
On-campus MOB (physically connected or adjacent to a hospital campus) historically commanded premium pricing reflecting tenant demand from hospital-affiliated practices and the convenience to patients accessing the hospital. The on-campus premium has narrowed somewhat as outpatient care has shifted to off-campus locations, but it remains meaningful, particularly for high-acuity specialties.
Lease structures are CAM-heavy
MOB leases often have higher base rents and significantly higher CAM than generic office, reflecting the specialized utility loads (medical-grade HVAC, sterilization, biohazard handling), elevated parking ratios for staff and patients, and intensive cleaning and waste handling requirements. Properly structured CAM reconciliation matters more in MOB than in most categories.
Tenant Improvement (TI) allowances are large and often rolled in
The high cost of medical buildout means MOB leases often include large TI allowances paid by the landlord and amortized into rent over the lease term. This produces higher headline rents than comparable generic office. When underwriting cap rates, distinguishing “true” base rent from TI-amortized rent matters.
What Drives Value in MOB
Tenant credit mix
For multi-tenant MOB, the weighted credit profile across the rent roll drives cap rate. Hospital-affiliated and investment-grade tenants tighten cap rates; private-practice-heavy rent rolls widen them.
Weighted-Average Lease Term (WALT)
Same metric as multi-tenant retail. MOB tends to have longer WALTs than generic office due to buildout-driven renewal stickiness, but the WALT-to-cap-rate sensitivity remains.
Property position (on-campus vs. off-campus, hospital affiliation)
On-campus and hospital-affiliated off-campus MOB price tighter than independent off-campus MOB at comparable credit, all else equal.
Specialty mix
The healthcare specialties represented in the rent roll affect long-term performance. Outpatient-trending specialties (orthopedics, GI, urology, ambulatory surgery, dental, dermatology) are growth categories with strong forward demand. Specialties facing reimbursement pressure or consolidation present more risk.
Demographics of the trade area
MOB demand correlates with the demographic profile and growth of the patient population the building serves. Aging-population submarkets with strong healthcare infrastructure are the strongest performing MOB submarkets.
Parking and accessibility
Healthcare buildings have higher parking ratios than generic office (often 5–6 spaces per 1,000 SF versus 3–4 for general office). Inadequate parking is a real impediment to tenant retention and recruitment.
Hospital System Affiliation
The relationship between MOB and adjacent hospital systems is one of the structural questions in every MOB transaction:
- Hospital-owned — the hospital system owns the building, often leasing space to its own employed providers and affiliated practices. Increasingly common as hospital systems consolidate.
- Hospital-leased — the hospital is the master tenant or anchor tenant. Strong investor profile.
- Hospital-affiliated practices as tenants — private practices that are clinically affiliated with the hospital, often dependent on referrals from hospital-employed physicians. Stronger than purely independent.
- Independent practices — no formal hospital affiliation. Higher credit risk; reflected in cap rate.
The trend toward hospital system consolidation (and corresponding employment of previously independent physicians) means hospital affiliation matters more for MOB underwriting than it did a decade ago.
ASC (Ambulatory Surgery Center) Considerations
Ambulatory surgery centers warrant specific mention. ASCs are specialized facilities for outpatient surgical procedures, with extensive specialty buildouts (operating rooms with medical gas, recovery bays, sterile processing, ADA-compliant patient flow). Key considerations:
- Buildout investment is enormous — often $400+ per SF of buildout
- Tenant credit varies widely — physician-owned ASCs vs. corporate-owned (USPI, AmSurg, hospital-affiliated joint ventures)
- Reimbursement environment matters — payer mix and CMS reimbursement directly drive ASC profitability
- Renewal stickiness is extreme — the buildout investment makes ASCs among the stickiest medical tenants
MOB Lease Structures
Net lease structures dominate single-tenant MOB. Multi-tenant MOB commonly uses modified-gross or NNN structures with CAM reconciliation. Specific MOB lease features:
- Longer initial primary terms than generic office (10–15 years common)
- TI allowances amortized into rent (resulting in higher headline rents)
- CAM caps and exclusions are heavily negotiated
- Use restrictions and exclusives are often layered
- Restoration obligations at lease end are negotiated heavily given the specialized buildouts
Cap Rate Considerations
MOB cap rates compressed significantly through 2018–2022 as institutional capital recognized the category’s defensive characteristics. Current cap rates by subcategory:
- On-campus or hospital-affiliated, long-term lease, strong credit: tightest band
- Off-campus single-tenant MOB with strong credit: tight to mid band
- Multi-tenant off-campus MOB with diversified rent roll: mid band
- MOB with concentration risk or weaker credit: wider band reflecting risk
- Dialysis NNN single-tenant (DaVita, Fresenius): trades very tight given long-term corporate guarantees
Contact us for current Atlanta-specific cap rate ranges.
Frequently Asked Questions
Why is medical office considered defensive?
Healthcare demand is structurally tied to demographics rather than economic cycles. Healthcare spending grew through both the 2008–2009 financial crisis and the 2020–2021 pandemic period. Medical office occupancy and rent performance have outperformed generic office through multiple cycles.
What’s the difference between on-campus and off-campus MOB?
On-campus MOB is physically located on or directly adjacent to a hospital campus, typically housing hospital-affiliated practices and outpatient services. Off-campus MOB is freestanding, located in suburban locations near patient populations. On-campus traditionally traded at a premium; the spread has narrowed as outpatient care has shifted off-campus, but a premium remains for high-acuity specialties.
Is MOB a good 1031 replacement property?
Yes — MOB is a common 1031 replacement category, particularly for investors trading out of more volatile property types into defensive, long-lease assets. See our 1031 page.
How do I value a dialysis center?
Single-tenant dialysis centers (DaVita, Fresenius) are valued as long-term NNN net-lease investments. The relevant inputs are remaining lease term, escalation structure, lease structure (typically true NNN to absolute net), and the credit of the corporate guarantor. Trade similarly to other investment-grade NNN.
What about the impact of healthcare consolidation on MOB?
Mixed. Consolidation of independent practices into hospital systems has generally strengthened credit profiles in MOB (hospital systems have stronger credit than individual practices). However, consolidation has also accelerated outpatient care delivery shifts and put some specialty practices under pressure. The net effect varies by submarket and specialty.
Can a physician practice owner sell the building but stay as a tenant?
Yes — sale-leaseback transactions are common in MOB. A practice that owns its building can sell the real estate to an investor and sign a long-term lease back, freeing capital while preserving operations. We handle both sides of these transactions.
What about ASCs as investments?
Ambulatory surgery center real estate is a specialized investment category. ASC underwriting requires evaluating the operator (often a physician-investor partnership), payer mix, case volumes, and competitive position. We work with specialized ASC operators when the property warrants. General MOB skills don’t fully translate.
Ready to Talk MOB?
Find a medical office property →