LA Medical Sector Rents Drop to Five-Year Low Amid Competition Pressures
The Los Angeles medical outpatient sector has hit a rough patch as competition pressures the market, with vacancy rates breaking through the 10% threshold for the first time in over three years and rents dropping to a five-year low.
This clearly signals that healthcare providers are feeling the squeeze from policy shake-ups such as the One Big Beautiful Bill Act and broader economic jitters rippling through the industry, according to JLL Managing Director Bryan Lewitt.
"It's a market in transition - navigating uncertainty while keeping an eye on the rebound ahead," he told GlobeSt.com. "The dynamics of the midterm elections can only assist this correction for our healthcare tenants."
The total vacancy rate for LA medical outpatient buildings climbed to 10.4% in Q3 2026, up from 9.4% seen in the same period a year ago.
LA medical outpatient buildings' average asking rents decreased by 15 cents per square foot (PSF) during the past 12 months to $3.62 PSF in Q3 2026. This decline brings average market rents to their lowest level since 2021.
Despite the turbulence, asking rents have held their ground at $3.67 per square foot monthly, suggesting landlords remain confident in the market's fundamentals, according to JLL's Q3 LA Medical Outpatient Report.
Medical office buildings (MOBs), particularly lower-quality properties in secondary and tertiary markets, are facing increased competition from traditional office buildings for medical tenants, according to the report. This competition is putting downward pressure on asking rents and creating additional shadow inventory.
Historically, high development costs and barriers to entry have kept MOB vacancy rates below those of general office buildings. However, as that competitive advantage diminishes, higher vacancy rates and increased leasing pressure may become the new norm for the medical office sector.
Source: GlobeSt/ALM