The outpatient opportunity

Thirty years ago, the University of Florida-trained architect Carlos Alfonso launched a development firm to build CVS pharmacies and later shopping centers and other traditional real estate properties.

But in more recent years Alfonso and his partners at Tampa-based Alliant Partners Development have branched into a niche that has quietly emerged as one of commercial real estate’s most steady and lucrative areas: healthcare properties.

Alliant’s biggest score was converting a former grocery store into a nine-operating-room outpatient surgical center and headquarters for Florida Orthopaedic Institute, one of the nation’s largest orthopedic providers. They paid $13.3 million for the building — which had most recently been a Coca-Cola call center — and plowed millions into rehabbing it before selling it last fall to a real estate investment firm for $53.6 million.

Spencer Muratides, a former Alliant partner who helped orchestrate the purchase and conversion, called it “one of our proudest developments.”

The property provides a window into the sector of medical outpatient buildings, or MOBs, an industry term encompassing facilities ranging from physician offices to freestanding surgical centers. These are buildings where doctors replace knees and hips, perform colonoscopies or do any number of procedures once done in hospitals.

This migration of care out of hospitals, which has been going on for decades, is paced by a host of factors, including changes to federal payment policies, more demand from an aging population and high construction costs that suppress new supply — even as rents climb.

The number of Americans 75 and older is growing by more than 1 million per year, and outpatient real estate revenue has surged — rising 45% since 2020 and projected to continue to grow over the next five years, according to Colliers.

For real estate developers and investors, the appeal of MOBs is reliability. Though they seldom generate headlines like high-rise buildings or splashy mixed-use developments, they have consistently outperformed other real estate sectors through up-and-down market cycles. If another sector is performing like a race car — fast but with frequent trips to the repair garage — MOBs are a peppy sedan that you can count on to reach the finish line with a less bumpy ride.

Diving into the data

Data on MOBs underscore that return is only half the equation when it comes to a real estate investment; risk is the other half. Since 2015, MOBs have delivered annualized total returns of 6.1% with annual volatility of just 2.3%, lower than such core property sectors as retail, industrial, multifamily and office, according to NCREIF Property Index data analyzed by UF’s Bergstrom Real Estate Center. MOBs ratio of total return to standard deviation equals 2.66% over the last decade, higher than the other sectors (Figure 1).

Sources: NCREIF, UF Bergstrom Real Estate Center

The results align with a recent white paper, “The Quiet Achiever: MOBs Deliver Superior Risk-Adjusted Returns,” from Rethink Healthcare Real Estate, an affiliate of the investment firm Rethink Capital Partners. Sophie Kim, a vice president at the firm and the author of the paper, noted that while other sectors may post higher returns, they carry higher risk. “In times of uncertainty, MOBs offer what institutional investors rely on: predictable cash flow, durable occupancy, and resilient compounding that holds firm through market cycles,” she wrote.

Scott Brinker, CEO of Healthpeak Properties, one of the nation’s largest publicly traded owners of outpatient medical real estate, said on a recent earnings call that the category is “one of the few subsectors in all of real estate that’s had positive NOI [net operating income] growth every year for two decades. The Great Financial Crisis, whatever’s happening in the economy, it doesn’t matter. That sector still has positive growth because it’s a need-driven business.”

Florida is a prime market for investors seeking rising rents. The top three metro areas for medical office rent growth since 2020 are all in the Sunshine State: Orlando (31.1%), Tampa (29.4%) and Miami (28.9%), according to RevistaMed (Figure 2).

Figure 2 – Top 10 Rent-Growth Markets

Metros ranked by increase in base rents (per square foot) for medical properties

Rank	Metro	2Q20	1Q26	Change
1	Orlando	$21.36	$28.00	31.1%
2	Tampa	$19.68	$25.46	29.4%
3	Miami	$25.38	$32.72	28.9%
4	Birmingham	$21.07	$26.93	27.8%
5	Indianapolis	$19.21	$24.39	27.0%
6	Jacksonville	$20.88	$25.86	23.9%
7	Raleigh	$23.69	$29.18	23.2%
8	New Orleans	$21.71	$26.53	22.2%
9	Memphis	$22.00	$26.56	20.7%
10	Las Vegas	$21.24	$25.59	20.5%

Yet more data on MOBs’ momentum: Investment volume jumped 78% year-over-year in the first quarter of 2026, bringing the trailing four-quarter national total to $13.9 billion, according to CBRE’s latest U.S. Medical Outpatient Building Figures report. The Southeast led all regions with $4.1 billion.

A supply gap is a key driver, Toby Scrivner, director of the national healthcare group at Northmarq, said on a GlobeSt. Podcast in January. Since 2019, construction costs have risen 40% to 45%, constraining new supply. For existing landlords, the math is compelling.

“If you own a facility where you’ve been collecting $25-a-foot rents, and there’s nothing else available except for a new building that’s going to cost $38 a square foot,” Scrivner said, “you have a very enviable position.”

Another plus is tenant durability. Kayne Anderson, an alternative asset management firm based in Boca Raton, Fla., reported more than 80% of its medical tenants renew their leases, compared with a 54.8% average in traditional offices. This is a result of the high build-out costs that make relocation expensive for medical tenants.

Ian Anderson, senior director of research and head of life sciences and healthcare research at CBRE, said major academic medical centers such as Mayo Clinic, Cleveland Clinic and UF Health aren’t going anywhere. Cutting-edge procedures will always require those main campuses. But the tens of millions of aging Americans who need a knee replaced or a follow-up imaging scan can go elsewhere. When that happens, he said medical centers “start to say, ‘Let’s go find a private developer we can work with, that will find us the land, finance it and maybe we’ll just lease that.’”

Some big bets

Recent transactions signal heightened interest in MOBs by institutional investors. The biggest being in late 2025, when Welltower sold its entire outpatient medical portfolio of 296 buildings — 18 million square feet across 34 states — to a joint venture of Remedy Medical Properties and Kayne Anderson for $7.2 billion. This made Remedy/Kayne the largest private owner of outpatient medical real estate in the United States. Welltower said it sold the properties to pivot to pure-play senior housing, a sector buoyed by the same demographic forces.

Another Florida deal came in April when the global investment manager BGO acquired two ambulatory surgery centers in the Orlando-metro area from Tampa’s Harrod Healthcare Real Estate. The properties, purpose-built in 2023, were fully leased under long-term triple-net leases.

“We believe the fundamentals for healthcare real estate have never been stronger,” said Clint Hinds, BGO’s managing director of portfolio management. “Rent growth has reached some of the highest levels seen in our 15-year history.”

One structural dynamic shaping the opportunity is generational. Roughly 60% of existing healthcare real estate is owned by physician owner-users — senior partners who took the original development risk and are now approaching retirement, Scrivner said. As they exit, significant inventory is coming to market, drawing interest from private equity. Global healthcare private equity disclosed a record $191 billion in deal value in 2025, according to Bain & Company. Sale-leaseback transactions — in which a health system or practice sells its building to an investor and leases it back — have become a favored capital tool, representing nearly 10% of total medical office transaction volume in 2025.

Challenges and costs

Despite the favorable fundamentals, MOBs are not free of challenges. Consider changes to government policy: Last year’s One Big Beautiful Bill Act set in motion budget cuts to Medicaid and Affordable Care Act insurance coverage. The Congressional Budget Office estimated this will result in 14.2 million Americans losing insurance coverage by 2034, adding an estimated $84 billion in uncompensated care at hospitals. Up to 990,000 Florida residents could lose coverage over 10 years, costing the state’s hospitals an estimated $4 billion. A Deloitte survey found 80% of health system C-suite executives named dealing with regulatory and policy changes as their top strategic priority for 2026.

Anderson, the senior director at CBRE, said Medicaid reductions and lower ACA enrollment would both reduce patient volume in markets with high concentrations of government-insured populations. “If you are in areas with a significant population covered by Medicaid or government health insurance, that’s going to be problematic,” he said. “The risks are higher.”

A slew of factors has created what he called “skittishness” in producing new MOB supply, including post-COVID stress, federal policy uncertainty, soaring land costs, construction pricing and immigration-driven labor shortages. MOB construction completions in 2026’s first quarter were just 25% of the five-year quarterly average, according to CBRE.

But Anderson said that as policy uncertainty mounts and developers pull back on new supply, existing landlords in markets not heavily exposed to Medicaid cuts should benefit. He called it counterintuitive.

The fundamental complexity of building a medical facility is a wrinkle that can make constructing a MOB tough for traditional real estate developers. Rod Armstrong, a director of the Association of Medical Facility Professionals, said in February at an industry summit in Tampa that major medical centers are among “the most expensive buildings you can build.” Healthcare construction’s intensive MEP (mechanical, electrical and plumbing) systems remain the most cost-volatile segment of any project, and skilled labor is increasingly scarce.

David Robinson, director of project management and construction for Alliant, said the mechanical demands of a surgical facility have no equivalent in conventional commercial construction. Florida Orthopaedic’s operating rooms require robust air conditioning that holds temperatures below 70 degrees; ventilation systems so sensitive they cannot be connected to other parts of the building; fluid controls for surgical waste; and a dedicated system to manage medical gases — all scrutinized by state regulators and more expensive than anything required by standard office or retail builds.

In Florida, developers face an additional constraint: Ambulatory surgical centers must be built 5 to 7 feet above base flood elevation — a requirement that has eliminated otherwise attractive sites. “We’ve found some incredibly good locations that we’re not able to use,” Alfonso said.

Nevertheless, Alliant’s steps to rehab a former grocery store into an orthopedic surgical center provide a sturdy playbook, one Scrivner touted on the podcast. First, identify undervalued real estate in a growth market, next convert it to medical use, then secure a creditworthy long-term tenant and finally sell to institutional investors. By transforming underperforming retail or office properties, you’ll come in below new construction cost while cutting as much as 12 months off the timeline, he said.

The outlook

In the end, the demographics underlying healthcare real estate seem as reliable as that family sedan that gets you where you want to go. Kim, the vice president at Rethink Healthcare Real Estate, put it this way: “For institutional investors seeking dependable income, limited downside, and enhanced portfolio stability, MOBs provide a distinct and durable advantage.”

As for Alfonso and his investors, they’re looking for more deals like Florida Orthopaedic — and with good reason. In nearly two years, Alliant’s investors received roughly 1.75 times their equity. “They were really happy with this,” he said. “They’re kind of still hanging around, wanting to invest more with us.”

Alfonso noted his firm now has around half a dozen healthcare projects active or in planning stages.