Aging Boomers Could Drive Demand For Medical Office Buildings Through 2055

As baby boomers, once America's largest living generation, continue to age, demand for medical office space is growing with them.

According to the U.S. Census Bureau, the number of Americans 65 years old and up is expected to double to 92 million by 2055. The segment will make up approximately 23% of the country’s population by that time.

The medical office building sector has seen an increase in investor interest this year due in part to the number of baby boomers who require more medical services. U.S. medical office building vacancy rates have been decreasing for the last seven years and are now sitting at 8% thanks to strong Q1 absorption that continued to outpace completions this year, CBRE reports.

Based on these findings, investors have become increasingly confident in the need for in-office physician services in the coming years, pushing investment in MOBs nationwide to $9.9B as of Q1 with cap rates at record lows of 6.8%, CBRE reports.

“Comparatively moderate regional differences are an attractive feature of medical office as an investment class,” CBRE Healthcare Capital Markets Executive Vice President Lee Asher said in a statement. “Because there is demand for healthcare everywhere, investors are generally more willing to look outside the primary markets compared with traditional office investment, and this is apparent in pricing metrics.”

The five markets boasting the lowest Q1 vacancy rates were Nashville at 2.8%, New York at 3.2%, the San Francisco Bay Area at 4.2%, Louisville at 4.9% and Kansas City at 5.5%. Of these cities, Nashville experienced the strongest medical job growth.