Medical Office Real Estate in Phoenix, AZ

Cap rates for medical office properties in Phoenix vary by submarket, property class, and occupancy levels. The overall Phoenix market average cap rate is approximately 5.9%. Class A properties typically trade at lower cap rates than value-add opportunities.

Healthcare demand is driven by demographics (aging population) and medical necessity rather than economic conditions. People require medical care regardless of the economic environment, and the shift toward outpatient care continues to accelerate. Medical tenants have long lease terms, high renewal rates, and significant buildout costs that make relocation unattractive. These factors combine to produce stable occupancy and rent collection even during economic downturns.

On-campus MOBs are located on or immediately adjacent to a hospital campus, benefiting from direct referral traffic, shared services, and the hospital system brand. They typically command lower cap rates (4.5-5.5%) due to perceived stability. Off-campus MOBs are standalone or in medical parks away from hospitals, typically trading at higher cap rates (5.5-7.0%) but offering potentially higher returns. Off-campus properties may have more diverse tenant bases and less dependence on a single health system.

The TSMC complex and related supplier investments are driving demand across all asset classes in north Phoenix and the broader metro. Industrial space for chip packaging and equipment suppliers, housing for an influx of skilled workers, and retail to serve new residential communities are all seeing increased demand. The long-term impact is expected to be transformative, similar to what the auto industry did for the Southeast.

Key risks include water supply constraints in the long term, near-term multifamily oversupply, and sensitivity to California migration trends that could slow. The market is also susceptible to broader economic cycles given its growth-dependent nature. Summer heat limits outdoor retail concepts and can impact construction timelines and costs.