Medical Office Investment in Columbus
Columbus medical office isn't just riding the aging population wave — it's getting pulled along by Ohio State's medical expansion and the Intel money flowing through the region. Cap rates sit in that sweet 6.2% to 7.8% range, with the best hospital-affiliated properties trading closer to 6%. The market's got legs. OSU Wexner Medical Center keeps expanding, OhioHealth and Mount Carmel are both growing their outpatient footprints, and we're seeing more independent practices sell to health systems then lease back their space. That creates stability, but you've got to know which health systems have the balance sheets to back long-term leases.
Market Context
Cap Rate Range
6.2% to 7.8%, with hospital system-backed properties at the tight end and independent practice buildings pushing 8%+
Current Vacancy
8.2% overall, but that includes older Class B space that needs significant TI. Class A medical office with modern infrastructure runs 4-5%
Rent Trend
Up 3.2% year-over-year, driven by outpatient migration and specialized space requirements. Medical rents running $24-32 PSF triple net
Absorption
185,000 SF absorbed in trailing twelve months, with 65% going to health system expansions rather than new practices
Price Per Unit Trend
Medical office selling at $185-275 PSF depending on tenant credit and specialized buildout. Surgery centers commanding premium
Transaction Volume
$142M in medical office sales trailing twelve months, up 18% from prior year as health systems monetize owned real estate
Submarket Analysis
OSU/University District
6.2-6.8% capVacancy
3.1%
Avg Rent (1BR)
$28-34 PSF NNN
Strongest fundamentals. OSU Wexner expansion creating spillover demand
OM Tip
Emphasize proximity to main hospital campus and resident/fellow population density
Dublin/Northwest
6.5-7.2% capVacancy
4.7%
Avg Rent (1BR)
$26-32 PSF NNN
Affluent patient base, good highway access. Some new supply coming
OM Tip
Highlight household income demographics and Intel employee population growth
Hilliard/West Side
6.8-7.5% capVacancy
6.3%
Avg Rent (1BR)
$24-29 PSF NNN
Growing suburban area with limited medical office supply
OM Tip
Play up population growth stats and distance to competing facilities
Westerville/North
7.0-7.6% capVacancy
7.8%
Avg Rent (1BR)
$23-28 PSF NNN
Solid but not spectacular. Mount Carmel Health presence helps
OM Tip
Focus on health system relationships and referral patterns
Grove City/Southwest
7.2-7.8% capVacancy
9.4%
Avg Rent (1BR)
$22-26 PSF NNN
Value play area. Some older inventory needs updating
OM Tip
Stress any recent capital improvements and below-market rent upside
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What Your OM Needs to Address
Health System Credit Analysis
Don't just say 'hospital-backed tenant' — specify which health system and their credit metrics
Data to Include
Health system bond ratings, local market share, physician employment vs independent contractor model
Specialized Infrastructure Detail
Medical tenants care about stuff regular office tenants don't — medical gas lines, imaging shielding, higher electrical capacity
Data to Include
Medical gas rough-in locations, lead-lined rooms for X-ray, electrical capacity per suite, parking ratios
Referral Network Dependencies
Some medical practices are tied to specific hospital referral patterns that could shift
Data to Include
Tenant referral sources, exclusive vs non-exclusive arrangements, percentage of revenue from hospital-employed physicians
Regulatory Environment Impact
Healthcare reimbursement changes can hit tenant cash flow faster than other property types
Data to Include
Tenant payer mix (Medicare/Medicaid vs commercial insurance), historical rent coverage ratios, lease personal guarantees
TI and Re-tenanting Costs
Medical buildouts cost 2-3x regular office TI and limit future tenant pool
Data to Include
Historical TI costs per tenant, specialized equipment installations, despecialization costs for non-medical use
Competition and Certificate of Need
Some medical services have regulatory barriers to entry that protect existing tenants
Data to Include
CON requirements for tenant services, competing facilities within 3-mile radius, barriers to new competition
Investment Outlook
Short Term
Strong fundamentals through 2027. Health system consolidation creating sale-leaseback opportunities, and the Intel hiring surge means more insured lives in the market. Watch for interest rate moves affecting health system capital allocation decisions.
Medium Term
2027-2030 should see continued outpatient migration from inpatient settings. Columbus population growth supports new medical office development, but development costs are high enough that new supply won't flood the market. Biggest risk is if health systems decide to own rather than lease their outpatient space.
Long Term
Demographics are your friend — aging Ohio population needs more healthcare services. Columbus is positioned well as a regional medical hub. Biggest unknown is how telemedicine and retail health clinics (CVS, Walgreens) affect traditional medical office demand. Properties with good health system relationships should hold value.
Buyer Profile
REITs dominate the large health system deals. Private equity medical office funds active on $5-25M properties. Local high-net-worth investors and family offices will pay up for single-tenant buildings with personal guarantees from established practices.
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