Austin’s Medical Office Market continued to show signs of stabilization in Q1 2026 as the sector moved further away from the supply-driven pressure of prior years. While vacancy remained elevated at 12.2%, the market still posted 1.7% year-over-year rent growth, indicating that fundamentals are beginning to improve.

 

At the same time, investment activity remained active with 34 sales recorded during the quarter, while the development pipeline stayed well below the levels seen throughout 2023 and 2024. Taken together, these trends suggest the market is gradually regaining balance as supply pressures ease and overall performance becomes more stable. This continued moderation in new supply should help support healthier leasing conditions and more sustained market improvement in the quarters ahead.

Key Findings

• Stabilizing Market Conditions: Austin’s medical office market showed signs of improving balance in Q1 2026, with 12.2% vacancy, 1.7% year-over-year rent growth, and a lower construction pipeline supporting more stable fundamentals.
• Reduced Development Pipeline: Construction activity totaled 131,005 SF, remaining well below the much higher levels seen throughout 2023 and 2024, easing future supply pressure.
• Stable Investment Activity: The market recorded 34 sales at an average 6.0% cap rate, reflecting continued investor interest and relatively stable pricing despite still-elevated vacancy levels.

Houston Demographics

Source: CoStar Group, Inc.

 

• Unemployment Rate: 3.6%
• Households: 1,094,265
• Current Population: 2,616,899
• Median Household Income: $103,006

Rents

Average asking rent reached $38.26 per SF in Q1 2026, with 1.7% year-over-year growth, highlights continued rent increases even as the market worked through elevated vacancy. That growth suggests landlord pricing has remained relatively stable despite broader occupancy pressure, and in a market recovering from heavy deliveries, even modest gains are still meaningful. With construction activity now well below prior peaks, Austin’s medical office market is better positioned to support steadier, healthier, more durable, and more sustainable rent growth moving forward.

 

Market Asking Rent Per SF

Source: CoStar Group, Inc.

 

Vacancy

Vacancy reached 12.2% in Q1 2026, remaining elevated as the market continues to absorb new supply delivered over the past several years. Leasing activity remained modest, with 852 SF of positive absorption recorded during the quarter, indicating that demand is still present but not yet strong enough to rapidly compress vacancy. However, with construction activity slowing considerably, the pace of new deliveries is no longer putting additional upward pressure on vacancy.

Vacancy Rate

Source: CoStar Group, Inc.

 

Construction

Construction activity totaled 131,005 SF in Q1 2026, reflecting a slight increase from the prior quarter but remaining significantly below historical levels. The development pipeline has declined sharply from the 300K-700K+ SF range seen throughout 2022-2024, signaling a clear pullback in new projects. This sustained slowdown in construction reduces future supply pressure and allows existing space more time to lease.

SF Under Construction

Source: CoStar Group, Inc.

Sales

Sales activity remained steady in Q1 2026, with 34 transactions recorded and an average 6.0% cap rate, indicating continued investor interest in Austin’s medical office sector. Despite elevated vacancy, pricing has held relatively stable, reflecting confidence in the market’s long-term fundamentals. Deal volume at this level suggests buyers remain active and willing to transact, particularly as improving supply conditions create a more favorable outlook. Overall, the investment market continues to demonstrate resilience and stability heading into the remainder of the year.

Cap Rate

Source: CoStar Group, Inc.

By the Numbers

Q1 2026 | Source: CoStar Group, Inc.

• # of Sales: 34
• Sales Growth (QOQ): 25.0%
• Price Per SF: $299
• Vacancy Rate: 12.2%
• Rent Growth: 1.7%
• Asking Rent Per SF: $38.26
• SF Under Construction: 131K
• SF Delivered: –
• SF Absorbed: 852