Written by: Collin Fitzgerald
Collin specializes in research capabilities, providing support for the Colliers Columbus Office, Industrial and Retail groups. He is responsible for executing data reports, maintaining a commercial property database, reporting quarterly trends, performing data analysis and utilizing statistical information to predict future behavior in the market. Keep reading for insight into traditional office vs. medical office cap rates over the past 5 years.
*Includes office transactions over $1,00,000 with published cap rates
In recent years, traditional office cap rates in the U.S. have seen fluctuations largely influenced by the broader economic landscape, interest rates and the pandemic-driven shift toward remote work. As companies reassess their office space needs, demand for traditional office buildings has softened in some regions, leading to slight upward pressure on cap rates. Additionally, as interest rates have risen, especially after 2022, cap rates for traditional office spaces have similarly risen as investors seek higher returns to offset increased borrowing costs. In contrast, medical office cap rates have generally remained more stable and lower than traditional office cap rates. This sector benefits from a consistent demand driven by demographic trends, including an aging population and a growing need for healthcare services. Even during the pandemic, medical office spaces continued to attract investors, due to their essential nature and the long-term leases often associated with healthcare providers.
The Columbus office market reflects these broader national trends. In the traditional office segment, Columbus has experienced a rise in cap rates, particularly for older or less adaptable office buildings. However, newer office developments in vibrant areas like the Short North or near the Ohio State University are seeing more resilient demand, moderating the rise in cap rates for prime assets. In the medical office sector, Columbus remains a strong performer. With a large and growing healthcare industry anchored by major hospital systems like OhioHealth and Nationwide Children’s Hospital, demand for medical office space has been robust. As a result, cap rates for medical offices in Columbus have stayed low, in line with national trends.