LA's Medical Office Landlords Face New Competition From Office Towers
Medical office buildings in Los Angeles delivered another steady performance in the second half of 2025, with market conditions shaped less by dramatic demand shifts and more by structural dynamics that kept both vacancy rates and rents relatively stable.
Overall vacancy ended the year just 10 basis points higher than in 2024 and remained well below 2023 levels, signaling that tenant demand held firmly across most submarkets. Strong absorption in the Tri-Cities, San Gabriel Valley, and Santa Clarita Valley—where vacancies fell by 50, 90, and 260 basis points, respectively—helped counterbalance softer conditions elsewhere.
The primary factor influencing performance was competitive pressure from general office landlords.
With traditional office buildings continuing to seek new uses amid broader office market challenges, many owners pursued medical conversions, effectively expanding the supply of medical-appropriate space even though no new multitenant MOB developments were delivered for three consecutive years.
This shadow supply kept rental rates from rising, resulting in a year-end average of $3.69 per square foot—essentially unchanged from the prior three years.
Because this competitive dynamic persisted throughout 2025, MOB owners were unable to push rents despite stable demand, and the market's performance reflected a balance between healthy occupancy and constrained pricing power.
The year-end rates for 2022 ($3.70/square foot) and 2023 ($3.68/square foot) reveal effectively no rent growth over four consecutive years.
Chris Isola, Executive Vice President at JLL, told GlobeSt.com that the most impressive aspect of the year-end data was the resilience of the medical outpatient building market.
"While there have been slight quarterly fluctuations in the vacancy rate, it has remained effectively the same since 2020," Isola said.
"This shows that healthcare industry headwinds, such as declining reimbursement rates, reductions in Medicaid coverage, and increasing operational costs, have not negatively impacted the demand for MOB space in LA County."
He said the surprising aspect of the data is that, despite a market showing endemic stability, developers have not broken ground on any speculative medical buildings in LA County over the past two years.
Source: GlobeSt/ALM