Macroeconomic Highlights

The broader economic environment in Q3 2025 showed steady improvement, creating a more supportive backdrop for real estate performance across all major sectors. Inflation continued to cool and interest rates stabilized, giving both owners and investors greater clarity around financing and asset values. Limited new development—whether in housing, healthcare, or storage—remained a defining theme, helping strengthen occupancy, restore pricing power, and improve revenue trends. Consumer mobility and household formation showed modest gains, supporting leasing momentum in storage and consistent demand in manufactured housing, while demographic-driven needs continued to underpin healthcare real estate. Although operating costs such as taxes and utilities remain elevated, disciplined management and healthier revenue growth helped offset those pressures. Overall, the quarter reflected a market that is rebalancing, with fundamentals moving in a more constructive direction heading into 2026. 

Inflation and the 10-Year Treasury Since 2022

Inflation and the 10-Year Treasury Since 1962

Q3 2025 Healthcare REIT Data Overview

Q3 2025 Healthcare Real Estate Operating Fundamentals

Healthcare Real Estate Lease Rates

Across the healthcare real estate landscape, lease rate dynamics strengthened meaningfully during Q3 as operators leveraged improving occupancy, tightening supply, and growing tenant demand. Outpatient medical continued to show strong pricing power: Healthpeak achieved 3%+ annual escalators, positive cash re-leasing spreads of 5.4%, and renewal TI levels as low as $1.41 psf/year—well below historical norms, signaling favorable leasing leverage for landlords . Healthcare Realty emphasized that improved occupancy has shifted their approach from volume-driven leasing to prioritizing higher escalators, stronger spreads, and maximizing economic returns, supported by cash leasing spreads of 3.9% and escalators averaging 3.1% across the portfolio . 

In senior housing, both Welltower and Ventas continued to experience strong rate growth due to needs-based demand and disciplined pricing strategies. Ventas reported 4.7% RevPOR growth in its SHOP portfolio as dynamic pricing balanced occupancy and rate strength, with both move-in rents and in-house rates rising year-over-year . Welltower’s senior housing operating platform saw RevPOR growth of 5.1%, supported by strong pricing power and ongoing occupancy gains that amplified revenue growth across its U.S. and U.K. portfolios . These combined trends reflect a quarter where landlords across medical office, life science, and senior housing regained clear rate-setting power. 

Medical Office REITs – NOI/Occupied SF (MOB Same Store)

Healthcare Real Estate Occupancy

Occupancy gains were broad-based, with medical office and senior housing both rising on the back of resilient demand drivers. Healthcare Realty reported year-over-year same-store occupancy growth of 90 bps, sequential gains of 44 bps, and a full-year increase of 77 bps, ending the quarter at 91.1%, supported by sizable lease-up activity within underperforming assets and tightening supply across major metros . Healthpeak’s outpatient portfolio similarly improved to 91% occupancy, with new leasing volumes hitting record levels across the combined DOC + Physicians Realty Trust platform . 

Senior housing saw even stronger movement. Ventas delivered 270 bps YoY average occupancy growth in SHOP, led by 340 bps in the U.S., with especially strong contributions from independent living and sequential quarterly gains of 160–200 bps across many markets . Welltower experienced a 400 bps occupancy gain across its senior housing operating portfolio, with its U.K. platform achieving a standout 550 bps YoY ramp, fueling more than 10% revenue growth in that region alone . These occupancy improvements across all property types highlight normalized demand, ongoing recovery within senior housing, and sustained health system reliance on outpatient real estate. 

Medical Office REITs – Period Ending Occupancy (MOB Same Store)

Healthcare Real Estate Income & Expenses

Income trends were uniformly strong across all companies, driven primarily by occupancy gains, effective expense controls, and rising unit-level pricing. Healthcare Realty generated 5.4% same-store NOI growth, supported by reduced corporate expenses following internal cost actions and improving performance among previously lagging assets . Healthpeak’s outpatient medical and CCRC segments produced consistent NOI gains, including 9.4% CCRC cash NOI growth, tied to pricing strength and modest expense increases, while life science NOI was pressured by lower rents on several innovation-flex tenants due to market conditions . 

Senior housing income growth was the clear standout. Ventas delivered 16% SHOP NOI growth, with margins expanding 200 bps to 28% and incremental revenue margins exceeding 50%, supported by strong RevPOR and occupancy improvements across key markets . Welltower reported its 12th consecutive quarter of 20%+ NOI growth in its senior housing operating segment, driven by 10% revenue growth and an expanding 260 bps year-over-year margin uplift as RevPOR outpaced unit-level expenses . Expense growth in senior housing remained manageable relative to revenue gains, enabling material margin recovery after several inflationary years. 

Medical Office REITs – YoY Revenue Growth (MOB Same Store)

Medical Office REITs – YoY Expense Growth (MOB Same Store)

Medical Office REITs – YoY NOI Growth (MOB Same Store)

Healthcare Real Estate Investment & Transaction Activity

Transaction activity surged across the sector, with Welltower and Ventas driving the majority of volume while medical office owners selectively harvested gains in strong capital markets. Welltower announced $23.2 billion of year-to-date investments, including $14 billion of new acquisitions across more than 700 communities and $9 billion of dispositions and loan payoffs. This included major international moves such as a GBP 1.2 billion U.K. HC-One acquisition and a transformative GBP 5.2 billion acquisition of Barchester, spanning operating, triple-net, and development assets, alongside the sale of an 18 million sq ft outpatient medical portfolio for $7.2 billion with retained preferred equity and profit participation . 

Ventas remained exclusively focused on private-pay senior housing, closing $2.2 billion of acquisitions year-to-date and increasing its 2025 investment target to $2.5 billion, with 20 transactions covering 6,200 units across 15 states. Recent portfolio repositioning included converting 45 triple-net communities (78% occupied) into SHOP and preparing 65 communities for a 33% cash rent increase beginning in 2026 on renewed leases . Meanwhile, Healthcare Realty sold $500 million of outpatient assets year-to-date at a blended 6.5% cap rate and maintains a remaining $700 million pipeline largely under contract, with capital redeployed toward redevelopment and targeted development projects expected to add roughly $16 million of incremental NOI . Healthpeak executed $158 million of dispositions, with another $204 million under PSA, recycling into higher-return life science opportunities as demand indicators begin to improve . 

Medical Office REITs – Aquisition Dollar Amount History

*Excludes Healthcare Realty Trust merger with Healthcare Trust of America, for $7.75 billion in Q2 2022

Healthcare Real Estate Cap Rates & Bid-Ask Spread

Cap rate compression emerged most clearly in outpatient medical as transaction markets strengthened. Healthcare Realty explicitly noted that buyer appetite has increased, driven by healthier lending markets and strong health-system demand, allowing them to reduce their expected disposition cap rate midpoint by 25 bps. Their executed sales demonstrated cap rate stratification: 7.25% for non-core assets and 5.75% for core assets, with the Richmond portfolio achieving a high-5% cap rate at $425 psf and >93% occupancy, reflecting robust buyer competition and reduced bid-ask spreads for stabilized medical office real estate . 

Healthpeak also reported a “deep pool of buyers” for outpatient medical, signaling cap rate firmness and strong private-market valuation support, prompting the company to advance more than $1 billion of potential outpatient dispositions at attractive pricing levels . In senior housing, neither Ventas nor Welltower provided explicit cap rate figures, but both emphasized expanding acquisition pipelines, sellers engaging more actively, and improved deal flow—conditions that imply narrowing bid-ask spreads due to accelerating demand and limited new supply. 

Medical Office REITs – Implied Cap Rate History

*The implied cap rate data indicates the market value of each REIT.   

The implied capitalization rate is a culmination of the company value and total debt of each company divided by its NOI. 

Medical Office REITs – Enterprise Value History

Headwinds in the Healthcare Real Estate Market

Despite the improving fundamentals, several headwinds remain present across the healthcare real estate spectrum. Life science real estate continues to work through elevated vacancy, with Healthpeak’s occupancy at 81% and management acknowledging that occupancy will continue to decline for several months before bottoming out, due to expirations and tenants rightsizing footprints amid sector volatility . Innovation-flex tenants also contributed to lower rents and NOI pressure in portions of Ventas’s research portfolio, while Welltower noted that its significant number of lease-up assets within newly acquired senior housing communities would create a near-term drag on earnings despite long-term upside potential . 

On the medical office side, although fundamentals are strong, Healthcare Realty emphasized that certain non-core legacy assets carried higher capital needs and weaker operating performance, pressuring returns until dispositions are completed. Expense pressures—for staffing, utilities, and insurance—remain tangible in senior housing, although currently overshadowed by pricing power. Finally, all REITs acknowledged macro uncertainty around the broader economy, rate environment, and operating cost inflation, which can pressure margins even as revenues recover. 

Tailwinds in the Healthcare Real Estate Market

The quarter’s commentary underscored significant structural tailwinds for healthcare real estate, particularly in outpatient medical and senior housing. Healthcare Realty highlighted 17 consecutive quarters of occupancy growth in the top 100 MSAs, demand exceeding supply by 740,000 sq ft this quarter alone, and historically low levels of new outpatient development—all contributing to tightening fundamentals and landlord pricing power . Healthpeak echoed these themes and noted a rapidly expanding leasing pipeline across life science and medical office, signaling improving sentiment and stronger forward demand indicators . 

Senior housing remains the largest and most powerful tailwind across all health-related asset classes. Ventas described an unprecedented demographic wave, with the 80+ population set to surge, concurrent with record-low construction starts (just ~1,200 units in Q3), creating a prolonged supply-demand imbalance that is already producing double-digit NOI growth and large embedded occupancy upside in an 85%-occupied portfolio positioned for expansion . Welltower reinforced this megatrend by reporting 12 consecutive quarters of 20%+ senior housing NOI growth, rapidly accelerating U.K. and U.S. demand, and minimal new supply, setting the stage for sustained multi-year revenue and margin expansion across its operating platform . 

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