The Houston medical office market closed Q4 2025 with steady but measured performance, supported by solid leasing activity amid elevated vacancy. A total 100 medical offices sold this quarter, with assets trading at an average cap rate of 7.5% and $187 per square foot, reflecting cautious but ongoing investor interest. Leasing momentum remained positive as 508,000 square feet leased outpaced 329,000 square feet delivered. Vacancy was elevated at 15.2%, highlighting continued availability, particularly among older assets. Rent growth was modest but positive, with asking rents averaging $30.20 per square foot following 1.5% year-over-year growth. Overall, the market demonstrated resilience, though moderate rent gains and higher vacancy suggest conditions remain in a rebalancing phase going forward.

 

Key Findings

• Market Vacancy and Demand: Houston’s medical office vacancy remained elevated at 15.2%, though steady leasing activity helped prevent further expansion. With 508,000 square feet leased outpacing new deliveries, tenant demand showed resilience, particularly in well-located and higher-quality properties.
• Rent Trends and Pricing: Average asking rents reached $30.20 per square foot, reflecting 1.5% year-over-year growth. Rent gains remained modest as landlords balanced pricing power with competitive concessions, signaling a stable but cautious rental environment.
• Development and Investment Activity: Approximately 1.6 million square feet of medical office space remained under construction, as developers moderated new starts. The metro noted a total 100 sales this quarter, with pricing holding near $187 per square foot and cap rates averaging 7.5%.

 

Houston Demographics

Source: CoStar Group, Inc.

Unemployment Rate: 4.4%

Households: 2,869,552

Current Population: 7,900,549

Median Household Income: $83,933

 

Rents

Medical office rents in Houston trended modestly upward over the past year, reflecting gradual improvement in leasing fundamentals. Average asking rents increased to $30.20 per square foot, up from the $28 range earlier in the period. The upward movement suggests landlords are achieving selective rent growth, particularly in higher-quality assets and well-established medical submarkets. While overall rent growth remains moderate, the consistency of increases indicates stable tenant demand and limited downward pressure on pricing, even as vacancy remains elevated.

 

Market Asking Rent Per SF

Source: CoStar Group, Inc.

 

Vacancy

Vacancy across Houston remained elevated but showed signs of gradual improvement over the past year. The vacancy rate trended downward from the mid-15% range earlier in the period, ending at 15.2%. Tightening periods were driven by steady leasing activity that helped offset new supply, though gains were tempered by ongoing deliveries and competitive space availability. While vacancy remains above historical norms, the overall downward trend suggests progress toward stabilization. Continued absorption will be key to sustaining vacancy compression in the near term.

 

Vacancy Rate

Source: CoStar Group, Inc.

 

Construction

Houston medical office construction remained active but uneven over the past year, reflecting shifting developer sentiment. Quarterly construction starts fluctuated significantly, ranging from approximately 55,000 square feet to nearly 470,000 square feet. Total space under construction peaked near 2.0 million square feet before trending lower, ending the period at approximately 1.6 million square feet underway. The recent moderation in active construction suggests developers are exercising greater caution in response to elevated vacancy and modest rent growth.

 

SF Under Construction

Source: CoStar Group, Inc.

 

Sales

Deal activity in the Houston medical office market moderated in Q4 2025, with a total 100 sales, down from several stronger quarters earlier in the year. The quarterly fluctuations in sales volume underscore a market characterized by selective investor engagement, with buyers prioritizing stabilized assets and clear pricing opportunities amid elevated vacancy and modest rent growth. Despite the slowdown, pricing metrics remained relatively stable, suggesting underlying confidence in long-term medical office fundamentals. Notably, one of the most significant transactions of the quarter occurred at 1800 Augusta Drive, which sold for $6.7 million, highlighting continued activity among smaller-scale medical office assets.

 

By the Numbers

Q4 2025 | Source: CoStar Group, Inc.

# of Sales: 100

Cap Rate: 7.5%

Price Per SF: $187

Vacancy Rate: 15.2%

Rent Growth: 1.5%

Asking Rent Per SF: $30.20

SF Under Construction: 421K

SF Delivered: 329K

SF Absorbed: 508K