The Hidden Factors That Are Skewing Medical CRE Valuations Right Now

A lot of medical real estate looks stable on paper—but when you dig into the comps, the buildouts, and the tenancy, the numbers stop making sense.

Valuations are getting thrown off by three things we’re seeing again and again in the field:

First, deferred maintenance isn’t priced in. Investors are underwriting deals off surface-level rent rolls without accounting for aging HVAC, outdated fire systems, or upcoming code compliance work. That’s real money—and it’s not always visible in broker packages. We’re adjusting for it in every report.

Second, non-credit tenants are being treated like institutional leases. A local behavioral health group with five locations and no audited financials is not equivalent to a national dialysis provider. But we keep seeing cap rates flatten across both. That’s a mistake. Long-term value depends on lease survivability and actual payment performance.

Third, TI costs are being underestimated. Especially in second-generation space, the cost to bring a property up to clinical standard is higher than most people are modeling. That impacts market rent, yield, and ultimately value. If you’re using comps from generic MOB leases without adjusting for use type or licensing requirements, you’re off.

This is why real medical real estate valuations matter. Not because they check a box—but because they keep your pro forma grounded in what’s actually happening in the market.

📅 Want to walk through a facility or stress test your assumptions?

Book a 15-minute call

📰 Want monthly market insight on where values are moving?

Sign up for the newsletter