Blog Post

National Net Lease Group: Q2 2021 Medical/Office Building Report

Market Trends Review

Because of the changing medical environment caused by the COVID-19 pandemic, medical office product has become a targets asset class by private and institutional investors. The changing environment of the medical industry has place strain on workforce, infrastructure, and supply chain foundations. Historically, investment grade medical product such as hospitals have typically generated low cap rates due to demand from both private and 1031 exchange investors. Recently, new medical brands have emerged, and private investors are seeing opportunities with non-investment grade urgent care groups, specialized and emergency care facilities producing higher yields.

2021 Key Indicators

Urgent Care Center Industry

Expected to grow by 3% in 2021, which follows an annual average growth rate of 3.1% since 2016.

Virtual Visits

While consumers are keen on them, they are not completely satisfied with their interactions with the doctor or clinician.


Practicing family medicine accounts for 38.1% of the industry revenue.


Expected to arise between health care incumbents and technology giants.


Due to the implications of the pandemic, the medical industry is likely to see a surge of pent-up demand in the second half of 2021 from patients that delayed their healthcare needs.

Concentration of Urgent Care Centers in the United States

medical office single-tenant NNN sales volume & cap rates

2021 Economic Review & Forecast

COVID-19 Vaccination  |  315 million (52%) people in the U.S. have received their first dose (June, 2021)

Urgent Care Centers  |  Revenue is forecasted to grow at an annual increase of 5.9% until 2026

Health Care Spending  |  Expected to grow
at a CAGR of 4% over 2021-2024

10-Year Treasury Note  |  Expected to rise to near 2.2% in 2021, up from the current rate of 1.57%*

Inflation  |  Expected to rise 2.7% in 2021, up from 1.7% in 2020*

GDP  |  Expected to grow 6.6% in 2021, up from -5.8% growth in 2020*

*Source: Kiplinger Forecast & Reuters

national Medical employment

number of national mob investment sales

Average Summary Report – Cap Rates by Industry Sector

For this report, SRS reviewed Q2 2021 sales reported by Costar for the following sectors: dialysis, urgent care, general doctor and other medical (physical therapy, treatment centers, spinal care, and radiology). In Q2, it is especially important to understand the economic impact of the ongoing pandemic has had on the relationship between length of lease term and capitalization rates across all product types, as well as how the pandemic has affected buyer bias toward certain sectors. To do so, we compiled the following average summary reports for several data points throughout each mentioned sector. *Note: this report captures data only for transactions which have reported a sale price and capitalization rate. The following data has been collected from sources deemed reliable; it may not include confidential and/or proprietary information of the marketplace.


It is estimated the dialysis industry revenue will increase at an annual rate of 1.2% to total $29.4 billion through 2025. The United States is expected to continue to dominate the dialysis market due to a shortage of kidney donors, high consumers awareness, well-established healthcare infrastructures and advancements in medical technology. Combined with an aging population, growing federal funding and technology investment, dialysis centers are expected to expand their patient capacities. Q2, cap rates decrease to 6.37%, a decrease of 76 bps from last quarter as PSF increased 27% to $28.

urgent care

The urgent care industry contains approximately 10,000 locations in the United States resulting in a 20 billion plus market. Consumers are drawn to urgent cares given the broad range of healthcare services that offer walk-in visits, expanded hours including weekends, limited wait times and a lower cost alternative compared to hospitals. The urgent care industry is expected to grow by 3% in 2021, which follows an annual average growth rate of 3.1% since 2016. Cap rates increased by 11 bps in Q2 while overall sales volume increase by 25%.

general doctor

General physician medical office is the gatekeeper of healthcare in the medical industry. Although the primary care doctor industry is overcoming the lingering challenges of COVID-19, the industry is expected to grow 3.6% in 2021. Family medicine practice accounts for 38.1% of the medical industry revenue. Another underlining factor for this sector is federal funding for Medicare and Medicaid. As federal funding increases, patient medical care will also increase. Cap rates in this sector compressed by 21 bps in Q2 to 6.29%.


Similar to all other medical practices, the dental industry is also overcoming the lingering challenges of COVID-19 and drop in consumer demand. Recovery in the dental industry is expected to be slow, the industry is expected to benefit from the rising level of consumer disposable income and a recovering rate of dental care insurance as well as employment gains. The dental industry is expected to grow 8.4% in 2021, which follows an annual average growth rate of 1% since 2016. Historical cap rates in this sector show to be in the low 7%-high 6% range with cap rates recording at 7.45% in Q2.


Other medical sector includes physical therapy, treatment centers, spinal care, radiology, and other medical practices which do not fall under one of the other focused sectors. As this sector has a wide range of medical specialty sectors, cap rates range from high 5%-6% as geographic location and specific brand financials can weigh in on price ranges. In Q2, average cap rates compressed by 25 bps recording at 5.97%.