Healthcare

Healthcare Key Takeaways

Houston
23H1
23H2
• Houston ranks No. 1 in total SF for both construction and net

Houston
absorption among the top 50 MOB markets nationally
• Vacancy drops
• Positive absorption 12th straight quarter
• Construction down YoY, but deliveries nearly double

YOY 2023 H2 YOY Under YOY Overall Asking Lease YOY

Vacancy Rate Net Absorption Construction Rates (NNN)
10.9% FORECAST
900.6K SF FORECAST
2.1M SF FORECAST
$23.52/SF FORECAST

Houston Highlights for MOB

Houston’s medical office building (MOB) market experienced strong activity in 2023, recognized as the No. 1 market in terms
of net absorption and construction among the top 50 MOB markets nationally. The market posted 900,641 SF of positive net
absorption in the second half of 2023, increasing 14.4% from the first half. The annual total of 1.7 MSF represents more than
double the previous year’s 741,496 SF. The vacancy rate fell to 10.9%, dropping 100 bps from 11.9% a year ago. New MOB
inventory completed during the second half of 2023 totaled 637,340 SF, dipping slightly from the first half; completions totaled
1.7 MSF during 2023, more than double the 736,694 SF from 2022. Buildings underway have declined to 2.1 MSF at yearend
compared to 3.1 MSF at year-end 2022. In the second half of 2023, the average asking NNN rental rate declined slightly to $23.52
from $23.62 in the first half and is down 8.8% from $23.72 YoY.

Market Indicators Market Fundamentals

3.8% 2.3% $72
Houston Houston annual WTI Spot Price, ϳϬϬ͕ϬϬϬ ϭϰ͘Ϭй

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Rate employment for light sweet ϱϬϬ͕ϬϬϬ
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Historic Comparison MOB Only ϮϬϬ͕ϬϬϬ

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22H2 23H1 23H2 ͲϭϬϬ͕ϬϬϬ
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Total Inventory ͲϮϬϬ͕ϬϬϬ
43,285.3 44,077.6 44,714.9 ϲ͘Ϭй
(in Thousands of SF) ͲϯϬϬ͕ϬϬϬ
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Yϭ YϮ Yϯ Yϰ Yϭ YϮ Yϯ Yϰ Yϭ YϮ Yϯ Yϰ Yϭ YϮ Yϯ Yϰ Yϭ YϮ Yϯ Yϰ Yϭ YϮ Yϯ Yϰ
New Supply
407.7 792.3 637.3 ϮϬϭϴ ϮϬϭϵ ϮϬϮϬ ϮϬϮϭ ϮϬϮϮ ϮϬϮϯ
(in Thousands of SF)
ďƐŽƌƉƚŝŽŶ EĞǁ^ƵƉƉůLJ dŽƚĂůsĂĐĂŶĐLJ
Absorption New Supply Total Vacancy
Net Absorption
214.3 787.1 900.6
(in Thousands of SF)

Overall Vacancy 11.9% 11.6% 10.9%

Under Vacancy rates for MOB buildings have dropped below 11.0% for
Construction 3,076.6 2,474.9 2,050.8 the first time in five years, decreasing by 100 basis points year-
(in Thousands of SF) over-year to 10.9%.

Overall Asking Net absorption of 1.7 million square feet outpaced the total 1.4
$23.73 $23.62 $23.52
Lease Rates (NNN) million square feet of new deliveries during 2023.
Source: Revista Source: Revista

Recent Transactions

Lease Lease Sale Sale

Dynamic One Kelsey-Seybold Fort Bend Clinic Greenhouse Medical Plaza Katy Medical Plaza Phases I & II
1840 Dynamic Way 11555 University Blvd 2051 S Greenhouse Rd 23510 & 23530 Kingsland Blvd
South Main/Medical Center E Fort Bend Co/Sugar Land Katy/Grand Pky West Katy/Grand Pky West
75.8k SF 14.0k SF 114.4k SF 95.1k SF
Houston
Healthcare

23H2
Under Construction
100,000 SF or Greater

Building Size Percent Estimated

Property Name Property Address (SF) Preleased Completion Owner
Houston
Houston Methodist Cypress MOB 1 24500 Northwest Fwy 162,900 100% 4/1/2026
Methodist
Houston
Houston Methodist Cypress MOB 2 24500 Northwest Fwy 160,200 100% 4/1/2026
Methodist

Kelsey-Seybold Clinic 11555 University Blvd 135,000 100% 4/1/2024 Welltower

Memorial
Memorial Hermann The Woodlands
Pinecroft Drive 135,000 100% 6/1/2025 Hermann Health
Medical Plaza 5
System
Kelsey-Seybold Clear Lake ASC Hub 18833 Eastfield Dr 121,368 100% 4/1/2024 Welltower

Kelsey-Seybold Northwest 19926 Northwest Freeway 120,000 100% 10/1/2024 Welltower

Source: Revista, CoStar

Texas Medical Center Update

The Texas Medical Center (TMC) recently celebrated
several grand openings. MD Anderson opened an
expansion to its Proton Therapy Center including a
new 106,000-square-foot building.
TMC celebrated the grand opening of Helix Park, its
new 37-acre research campus which will support
a collaborative mix of healthcare, life science and
business users. The park is shaped around a double-
helix green space, representative of a DNA structure.
Each Helix Park building is designed with public retail
in the front and parks in the middle.
Open in late 2023, Phase I’s two buildings include the
fully leased 250,000-square-foot TMC3 Collaborative
Building and the 350,000-square-foot Dynamic
One research building, which is 62.1% leased.
Five public parks within the new development are
open to the public, as are the ground floors of the
two new buildings. Under construction is another
138,000-square-foot, mixed-use building while a 521-
room hotel and a 50,000-square-foot office building
are both proposed for the next phase.
The economic advantages of Helix Park are estimated
at an annual impact of more than $5.4 billion with the
addition of more than 23,000 permanent new jobs.

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Colliers | Houston | 23H1 | Healthcare Report