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October marked a clear acceleration in medical office transaction activity across Texas. Sellers are adjusting to market realities, with average asking prices per square foot declining and average asking cap rates rising slightly—both contributing to a narrowing of the bid-ask spread. While the Federal Reserve reduced rates by 25 basis points, long-term Treasury yields—more directly tied to borrowing costs and cap rates—have remained relatively stable. Even so, investor sentiment is turning increasingly optimistic.   This renewed confidence, coupled with more realistic pricing, has led to a notable surge in activity. Accurately priced medical assets are attracting multiple offers and moving quickly. Our team alone has placed nearly $50 million under contract in the past 45 days across a diverse range of medical asset profiles throughout Texas.   Looking ahead, the anticipated end of Quantitative Tightening (QT) later this year should further support demand. While we don’t anticipate dramatic pricing swings, we do expect sustained, incremental growth as macroeconomic conditions continue to stabilize. The prevailing outlook is one of cautious optimism.   All signs point to a positive environment for medical real estate owners in Texas. In times like these, investor objectives—not short-term market timing—should remain the primary focus. Our team remains committed to long-term strategic planning, helping clients mitigate downside risk and prepare for value-maximizing liquidity events. We look forward to continuing to serve as a trusted resource and provide real-time market insight.

Across the U.S., healthcare delivery is undergoing a structural shift. Hospitals and health systems are moving more procedures and patient interactions out of acute-care campuses and into decentralized, outpatient, and even at-home models. This evolution—driven by cost efficiency, patient preference, and technology—is reshaping how and where care is delivered, and by extension, how medical real estate is valued and deployed. A recent Becker’s ASC report found that roughly 60% of health system executives are pursuing or exploring joint ventures in ambulatory surgery centers (ASCs). These leaders are investing heavily in hybrid facilities, outpatient hubs, and home-based care programs as part of an integrated continuum that extends beyond the traditional hospital walls. For real estate investors, this transition represents one of the most significant opportunities of the decade. The demand for smaller, flexible, well-located medical spaces is rising. Properties suited for conversion—such as former offices, strip centers, or ground-floor retail—can be repositioned into outpatient clinics, diagnostic centers, or micro-hospitals. Joint ventures between landlords and health systems are becoming more common, as providers seek to offload capital costs while maintaining control of their operational footprint. Key Investment Themes: Outpatient Expansion:  Expect continued demand for ASCs, urgent care, and specialty clinics near residential growth corridors. Conversions & Adaptive Reuse:  Underperforming office and retail assets offer prime opportunities for medical repurposing. Partnership Structures:  Health systems and physician groups are increasingly open to creative lease or JV structures with real estate capital. Technology Integration:  Buildings with infrastructure for telehealth, imaging, and remote monitoring will command premium rents. In Texas—and particularly in fast-growing markets like Austin—this shift is already underway. Developers are exploring smaller footprints, while institutional investors are targeting stable, long-term leases with healthcare operators. As care delivery continues moving closer to the home, the most successful real estate strategies will blend flexibility, medical-grade infrastructure, and accessibility to population growth centers. This is not just a shift in care delivery—it’s an evolution in how communities experience healthcare and how investors capture its future value.

HOUSTON, TX  – September X, 2025  – Partners Real Estate, a full-service commercial real estate firm with an integrated investment and development platform, announced today that it has arranged the sale of a 10,623 sq. ft. ambulatory surgery center located at 2813 Smith Ranch Road in Houston, Texas. Ryan McCullough, Partner and medical investment sales specialist, represented the seller in the transaction. The property is a fully equipped, turn-key ambulatory surgery center, strategically located to serve the growing healthcare needs of the Houston market. “This transaction underscores our team’s ability to effectively market specialized, turn-key healthcare assets and attract a robust pool of qualified buyers,” said Ryan McCullough. “We successfully generated multiple competitive offers for the seller, which allowed us to close the deal ahead of schedule and achieve a valuable outcome that exceeded our client's expectations.”

August continued the slow pace of 2025 for medical office transaction volume, following what was the slowest quarter in over a decade. Between the seasonal lull of late summer and the back-to-school transition, activity remained muted across most markets. The data reflects a continued backlog of inventory, with only about 7% of on-market properties transacting each month and average days on market increasing across nearly every major Texas metro.   Despite the slowdown, there is a growing sense of optimism heading into the final quarter—historically the most active period for closings. The anticipated Fed rate cut in September, coupled with CRE-friendly legislation and favorable cyclical timing, could help drive renewed momentum. Encouragingly, we’ve already begun to see an uptick in buyer engagement as summer fades. While the bid-ask spread remains a hurdle, both buyers and sellers appear increasingly willing to make concessions to get deals moving.

Medical office inventory across the U.S. is growing at its slowest pace in over a decade. Annual supply growth has dropped to just 1.1 to 1.2 percent, compared to a 10-year average of 1.5 percent, as developers face elevated financing costs, rising construction expenses, and ongoing labor shortages. Despite limited new construction, tenant demand remains strong in major markets like Houston and Dallas-Fort Worth. These metros continue to post healthy net absorption, but even here, the supply pipeline is showing signs of strain. In Texas, more than half of all listed medical office properties have been on the market for over six months. That figure stands well above national averages, where faster turnover is driven by steady new supply and more frequent pricing adjustments. The disconnect is most apparent in Austin, where only 28 percent of listings have come to market in the past six months. This signals a tight supply environment and growing pent-up demand. So what’s causing the slowdown? In many cases, sellers are holding firm to pre-rate-hike pricing. That reluctance to adjust expectations has created friction in the market. Well-located but mispriced assets are sitting idle, leading to extended time on market and reduced transaction velocity. Unless seller expectations align with today’s capital environment or borrowing conditions improve, this trend will likely continue. For active buyers, however, this climate presents an opportunity. With patient capital and creative deal structuring, there is still value to be unlocked—even in a market defined by hesitation.

In commercial real estate, a building that sits on the market for months without movement sends a clear signal: something is off. Across Texas, inventory is growing stale, and sales velocity has plunged. According to a recent report by GlobeSt, medical office building (MOB) sales totaled just  $1.52 billion in Q2 2025  — the  lowest quarterly total in more than nine years . This slowdown comes despite strong fundamentals: occupancies are near record highs and asking rents are holding steady around  $25.80/SF (NNN) . So what gives? The answer is a growing disconnect between what sellers want and what buyers are willing to pay. And in Texas, this mismatch is showing up clearly in the form of stale inventory. Texas: A Market Full of "Stuck" Listings Recent housing and CRE data from sources like Redfin and  Realtor.com  reveal that  Texas leads the nation in stale listings . In June 2024, more than  70% of listings  in Austin and San Antonio had been on the market for  30 days or more . While this data is focused on residential, the same market mechanics apply to commercial real estate: overpriced assets stay on the shelf. In the medical office segment, that shelf is getting crowded. Sellers remain anchored to 2021-2022 valuations, while rising cap rates and interest costs are driving buyers to demand discounts. As a result, we’re seeing medical office buildings linger on the market in every major metro across the state. Four Metros, One Pattern We evaluated inventory age across  Austin, Dallas-Fort Worth, Houston, and San Antonio . The average across Texas for properties listed within the last 6 months is only  42% . Here's how each market compares: Austin : With only  28% of medical office listings added in the last 6 months , the capital city has the  tightest market for new inventory . DFW :  43%  of listings have come to market in the last 6 months, slightly above the Texas average. New supply is high, particularly in suburban markets. Houston : Leading among Texas metros with  48%  of inventory listed in the last 6 months. While fresher listings are entering the market, sales velocity still remains low. San Antonio : Closely aligned with the state average,  41%  of listings are new within the last 6 months. Although a smaller and more stable market, San Antonio still shows signs of price resistance. Several listings have remained active beyond the 6-month mark, signaling a similar bid-ask gap. Across all markets, the story is the same: properties are getting stuck, not because demand has dried up, but because pricing has not adapted to the new investment climate. A Market Caught Between Fundamentals and Financing What makes the slowdown in medical office especially striking is that the  occupancy and rent growth fundamentals remain healthy . But as interest rates have remained elevated and financing conditions tightened, the cost of capital and construction has changed dramatically. Investors are expecting higher returns to justify acquisitions. That means cap rates must go up. But if asking prices don’t adjust accordingly, deal volume dries up. That’s exactly what we’re seeing. Meanwhile, lenders have become more selective. With tighter underwriting standards, fewer deals are getting across the finish line. Stale Inventory Is a Strategic Problem When a property sits unsold or unleased for too long, it creates drag on the market. Brokers, landlords, and investors all start second-guessing value assumptions. For tenants, stale inventory may offer opportunities to negotiate more favorable terms. For sellers, it may be time to rethink positioning. From Stagnation to Opportunity The Texas medical office market isn’t broken — it’s misaligned. Demand remains solid. Fundamentals are healthy. But without a pricing reset, the logjam will continue. Q2’25 reminded us that even the most stable asset classes can falter if sellers don’t adjust to a new environment. Medical office buildings aren’t immune to market inertia. They can get stuck on the shelf. The next quarter will be critical. Will sellers blink? Will cap rates rise further? Or will some portfolios be repositioned to finally clear the pipeline? Whatever happens next, one thing is clear:  stale inventory is both a signal and an opportunity . For those who pay attention, it’s also a strategy.  With so much overpriced inventory on the market, new - appropriately priced - listings get a ton of attention. We are Here to Help If you are considering selling, let's gameplan a sound strategy to meet the market where it's at.  If you are in a holding pattern, let's analyze your portfolio to see if there is anything you can be doing in the off season to maximize exit value when the time is right.

Passed: July 4, 2025 | Effective Immediately The tax landscape for real estate has changed dramatically. The One Big Beautiful Bill Act—formally passed by Congress and signed into law on July 4, 2025—delivers sweeping tax reforms with big implications for property owners, developers, and investors. Here’s what you need to know: 100% Bonus Depreciation Reinstated Applies to qualifying assets acquired after Jan 19, 2025  and placed in service before Jan 1, 2030 .This includes HVAC systems, fixtures, and other property components. Owners can immediately deduct full costs, boosting early-year cash flow. Increased QBI Deduction The Qualified Business Income deduction for pass-through entities is now permanently increased from 20% to 23% .Effective tax rate drops to 28.49%  for real estate pros and STR (short-term rental) operators. Expanded Section 179 Expensing The deduction cap is raised to $2.5M , with phase-out starting at $4M —ideal for equipment and leasehold improvements. EBITDA-Based Interest Deductions Return From 2025–2029 , interest deductions can be based on EBITDA  instead of EBIT.This supports higher leverage—especially beneficial for value-add and development projects. Qualified Opportunity Zone (QOZ) Extension Extended through 2033  with new rural incentives , including a 30% basis step-up  after five years. Rural and tribal areas are positioned for major capital inflows. Low-Income Housing Tax Credit (LIHTC) Expansion 9% LIHTC allocation increased by 12.5%  (2026–2029) 4% threshold lowered to 25% DDA status expanded to tribal and rural zones SALT Deduction Cap Increased The State and Local Tax (SALT) deduction cap rises to $40,000  for incomes under $500K (2025–2029), phasing out above that.Especially impactful for real estate owners in high-tax states. Mortgage Insurance Premiums Deductible Again Reinstated deduction saves qualified property owners an average of $2,364/year . Solar and Energy Efficiency Credit Extended Home and building efficiency upgrades (e.g., solar panels, insulation, HVAC) remain eligible for a 30% federal tax credit  through Dec 31, 2025 . Strategic Considerations With many of these tax benefits being time-sensitive, working with an experienced commercial real estate advisor has never been more valuable. From identifying properties that qualify for bonus depreciation and QOZ incentives to structuring deals that optimize the new 23% QBI deduction, we help our clients stay ahead of the curve. Whether you're navigating rural development opportunities, leveraging tax credits, or repositioning assets in high-tax states, we align your investment strategy with today’s evolving tax landscape to help you maximize returns and move with confidence.

Cautious Optimism Amid Ongoing Volatility  May brought another month of market hesitation. While early 2024 was dominated by concerns around tariffs and inflation, recent headlines have shifted focus toward the broader strength of the U.S. financial system. Mid-month, Moody’s issued a U.S. credit downgrade, triggering a spike in Treasury yields—pushing the 10-year back into the 4.5% range. This continues to pressure interest rates and challenge underwriting for more aggressive acquisitions.  However, there are positive developments worth noting. The House passed the “Big Beautiful Bill,” which includes several favorable provisions for real estate owners—most notably, the reinstatement of 100% bonus depreciation. While Senate approval is still pending, the bill’s momentum could reignite buyer demand and motivate those on the sidelines to re-engage.  Additionally, we are now seeing the first ripple effects of upcoming debt maturities, prompting some owners to bring assets to market—creating strategic opportunities for well-positioned buyers.  As always, our team is here to provide insight and tailored strategies to help you navigate your investment goals during this period of transition. We look forward to connecting with you soon. Recent Closings

Where Are We Now? At the time of publishing this article, the 10-year Treasury yield has begun to decline significantly, falling from its previous highs. Just months ago, commercial property loan interest rates were increasing despite the Fed reducing the effective rate by 50 basis points from 5.33% to 4.83%. Now, however, we're seeing interest rates start to stabilize as the 10-Year Treasury yield retreats to under 4.30% down from the high of ~4.80% in January (2025). Why is that? Factors Influencing Treasury Markets | DOGE Treasury yields have recently started to decline due to several key factors. Concerns over economic slowdown, improving inflation metrics, and growing investor sentiment that the Fed may ease monetary policy in the coming months have led to a shift in the bond market. Additionally, demand for Treasuries has increased as investors anticipate a softer rate environment, contributing to lower yields. Furthermore, DOGE (Deficit-Oriented Government Efficiency) policies have positively influenced the market by reducing government spending, which in turn has strengthened the Treasury market and can also help reduce inflation. The Lag Period | 3 Months In Three months have elapsed since my original article from November 2024, ( Original Article ), which highlighted that typically, we see a lag period of about six months between Fed rate cuts and their impact on Treasury yields and commercial interest rates. It appears we are exactly halfway through this lag. While there are signs of relief, we are not out of the woods yet. To Be Determined | Tariffs The market is still evaluating the effects of this presidential administration's policies, particularly the impact of tariffs on global trade and domestic economic stability. A potential tariff war could have significant repercussions on fiscal policy, influencing inflation, consumer spending, and overall economic growth. As these policies unfold, they may alter the trajectory of interest rates and commercial lending conditions. In the Meantime... Talk to us. If you think there is value in having a market expert evaluate your situation, reach out for a complimentary consultation.

The healthcare real estate market is experiencing a robust resurgence in 2025, marked by significant improvements in sales, liquidity, and investor confidence.​ Surge in Sales Volume In 2024, healthcare property sales volume surged by an impressive 61% year-over-year, laying a strong foundation for continued growth in 2025. ​ Improved Liquidity and Financing Liquidity, which was tight in 2024, has shown marked improvement in 2025. Loan origination volume has increased by 7.4% year-over-year, indicating enhanced access to capital for investors and developers. Stable Interest Rate Environment While the Federal Reserve remains cautious about rate cuts due to inflation concerns, Cushman & Wakefield projects a 50 basis point reduction in 2025 and 2026. This relative stability allows investors and developers to plan more confidently, despite lingering concerns about potential tariff-induced inflationary pressures.  Investor Confidence and Market Outlook The combination of strong sales, improved liquidity, and a stable interest rate environment has bolstered investor confidence in the healthcare real estate sector. The sector's solid fundamentals are expected to support continued growth throughout 2025. ​ This analysis is based on insights from Erik Sherman's article, "Healthcare Real Estate Rebounds With Strong Sales, Improved Liquidity," published on GlobeSt.com on March 5, 2025.

Where Are We Now? At the time of publishing this article, it has been 60 days since the Fed reduced the effective rate by 50 basis points from 5.33% to 4.83%.  At the same time, we've seen interest rates for commercial property loans INCREASE... some by as much as 75 basis points from their September lows.  Why is that? Treasury Yields and Commercial Interest Rates  "The Treasury Market is the basis for almost all capital deployment." -Ray Dalio Historically, it is the Treasury Market, specifically the 10-Year Treasury, that sets the bar for commercial interest rates, not the Fed Funds Rate.  Understanding this relationship provides insight into how lenders and investors factor risk for commercial assets.  Factors Influencing Treasury Markets Treasury yields are on the rise due to several key factors. Increased government borrowing has led to a surge in the supply of Treasury bonds, pushing yields higher. Additionally, concerns over persistent inflation and uncertainty about future Fed policy have driven investors to demand higher yields as compensation for increased risk. These dynamics are contributing to upward pressure on Treasury rates. The Lag Period  There's a common misconception that reducing the fed funds rate IMMEDIATELY translates to lower commercial interest rates.  That is not the case. In fact, historically there has been a lag period, usually no more than 6 months, between the reduction in rates from the Fed and Treasury yields. Where Are We Going? It seems as if the Fed's restrictive monetary policy has accomplished it's goal of tamping down inflation AND there is ample reason to assume that erring on the side of caution is of utmost importance to the Fed's monetary policy.  The last thing the Fed wants to do is spark a second wave of inflation by easing off too quickly.  Our group believes that with some additional rate cuts, and a clearer political landscape, we could see Treasury Yields decline in the first half of 2025.  Time will tell. In the Meantime... Talk to us.  If you think there is value in having a market expert evaluate your situation - reach out for a complimentary consultation.

The medical landscape is evolving, and healthcare delivery is no exception. Over the last decade, a significant shift has emerged—moving away from traditional hospital campuses toward neighborhood-based medical care. This trend is reshaping the healthcare industry, with medical office buildings (MOBs) becoming critical in providing accessible, patient-centered care. For the first time in history we are seeing an inversion between total revenue spent in an outpatient setting compared to an inpatient setting.  Historically, healthcare providers operated from centralized hospital campuses, requiring patients to travel longer distances for specialized services. However, today’s healthcare environment is all about convenience, accessibility, and patient experience. According to a 2022 report from CBRE, outpatient visits are growing faster than inpatient stays, with outpatient services projected to grow 16% by 2025. Neighborhood-based medical offices bring services closer to communities, allowing patients to receive care without the inconvenience of navigating large hospital complexes. This shift offers numerous benefits for both patients and providers. Patients appreciate the convenience of shorter travel times and easier parking, while healthcare providers gain greater flexibility in where they practice. For physicians who own and occupy their own medical offices, this trend presents a prime opportunity to serve local communities while building equity in their real estate. Furthermore, private investors have taken notice of this growing trend. In 2021 alone, investment in medical office buildings reached $16 billion—a clear signal that demand is rising for these assets.   As Texas continues to expand rapidly, the need for localized, convenient healthcare options grows alongside it. Middle-market medical office buildings—ranging from $1 million to $20 million—are becoming highly desirable assets for both physician-owners and investors alike. Whether you’re a physician looking to relocate or expand, or an investor seeking a stable, recession-resistant asset, now is the time to capitalize on the movement toward neighborhood-based healthcare delivery.   The future of healthcare is closer to home than ever before, and it’s a shift that is here to stay.