Covid Stress-Tested Medical Office. The Rent Held.

In the spring of 2020, office and retail landlords fielded waves of rent-relief requests. Medical outpatient buildings (MOBs) told a different story. Across our own tenant base, only a few tenants asked for a deferral.

Those tenants had one thing in common. They were close-contact practices, such as dentistry and physical therapy, where patients avoided sitting inches from a provider in the early months of the pandemic.

The fix was simple. Those tenants received a few months of abated rent, or a longer stretch at half rent. The shortfall was added to the end of the lease, along with a term extension. The landlord gave up time value of money, not income, and kept the tenant.

Jeff Axley, Managing Principal, Ridgeline Capital Partners, summarized the result: "We didn't have anyone vacate or go dark. ... It ended up working out."

Healthcare demand is inelastic. A recession delays a renovation or a new hire. It does not cure a chronic condition, and people who are sick go to the doctor in any economy. Jeff puts it plainly: "Maybe your stomach hurts worse, maybe you need to go to the doctor more."

The occupancy record supports the point. Revista reports that MOB occupancy has stayed between 91.5% and 92.5% since 2018, a window that runs through the pandemic and the rate shock that followed (Revista, February 2026). JLL puts MOB occupancy at a record 92.7% at the end of 2025 (JLL, March 2026).

Sources measure this differently. CBRE reports national MOB vacancy of 9.8% across the 59 markets it tracks in 2Q 2026, which implies occupancy of 90.2% (CBRE, 2Q26). We name the source with every occupancy figure for that reason.

The labor market tells the same story from the demand side. U.S. health care employment rose by 520,400 jobs, or 2.2%, in the year to September 2026. Total nonfarm employment rose by 496,000 over the same period, so health care added more jobs than the whole economy's net gain (BLS, October 2026; Ridgeline calculation).

Medical office has never been a high-growth rent story. CBRE puts the average MOB asking rent at a record $25.46 per square foot in 2Q 2026, up 1.3% year over year (CBRE, 2Q26). Other readings run higher: Revista reports 1.9% asking-rent growth in 4Q 2025, and JLL reports 3.3% (Revista, February 2026; JLL, March 2026). The methods and periods differ.

The more useful comparison runs over a full cycle. CBRE reports that MOB rents in 2Q 2026 were 8.6% above their 1Q 2021 average, against 6.9% for traditional office (CBRE, 2Q26). New medical leases commonly carry 3% annual escalators or CPI-linked bumps (JLL, March 2026).

For an income investor, that profile matters more than headline growth. A modest, contractual rent increase on a tenant that stays is worth more than an aggressive projection on a tenant that leaves. Our aim is the first kind of income, not the second.

The main risk is tenant mix. The 2020 test was short, and the tenants who struggled were concentrated in specific specialties. One episode is not a law of nature.

Non-clinical tenants carry the second risk. Administrative and other non-clinical tenants in a medical building behave like commodity office users and move for cheaper space. Payer mix, health-system relationships and lease rollover deserve the same scrutiny they did before 2020. The pandemic showed that well-leased clinical space is resilient. It did not show that every medical building is.

MARKET SIGNALS

A narrow occupancy band. MOB occupancy has held between 91.5% and 92.5% since 2018 (Revista, February 2026).

Record asking rent. The average MOB asking rent reached $25.46 per square foot in 2Q 2026, up 1.3% year over year (CBRE, 2Q26).

Health care hiring. Health care employment rose 520,400 (+2.2%) in the year to September 2026, while total nonfarm employment rose 496,000 (BLS, October 2026).

Only close-contact practices, such as dentistry and physical therapy, asked Ridgeline for rent relief in 2020. Those tenants received a few months of abated rent or a longer stretch at half rent. The shortfall was added to the end of the lease with a term extension, so the landlord gave up time value of money, not income.

Medical outpatient building (MOB) occupancy has stayed between 91.5% and 92.5% since 2018 (Revista, February 2026). JLL puts it at a record 92.7% at the end of 2025 (JLL, March 2026). CBRE reports 9.8% vacancy across the 59 markets it tracks in 2Q 2026, which implies 90.2% occupancy (CBRE, 2Q26). Sources measure occupancy differently.

Medical office rents grow slowly and steadily. CBRE puts the average MOB asking rent at a record $25.46 per square foot in 2Q 2026, up 1.3% year over year, and 8.6% above its 1Q 2021 average, against 6.9% for traditional office (CBRE, 2Q26). New medical leases commonly carry 3% annual escalators or CPI-linked bumps (JLL, March 2026).

Medical office demand is inelastic: a recession delays a renovation or a new hire, but it does not cure a chronic condition. Health care employment rose by 520,400 jobs, or 2.2%, in the year to September 2026, more than the 496,000 gain in total nonfarm employment (BLS, October 2026; Ridgeline calculation). Tenant mix remains the main risk.

For informational purposes only. Not an offer to sell or a solicitation of an offer to buy any security; any offer is made only through confidential offering documents. Projections are not guarantees of future results.