Houston, TX Medical Office Market Report Q2 2026

Houston’s medical office market remained relatively balanced during Q2 2026, though leasing activity softened modestly during the quarter. Vacancy improved to 16.3%, continuing its gradual decline from 2025 highs, while asking rents averaged $30.55 per square foot despite a slight 0.8% annual decline. Development activity remained subdued, with only 85,510 square feet under construction, helping limit additional supply. Investment activity remained steady as 72 properties traded during the quarter, reflecting continued investor interest despite a higher interest rate environment.

 

Key Findings

• Leasing conditions remained stable as medical office vacancy held at 15.7%, while a limited development pipeline of just 85,510 SF under construction helped keep future supply growth in check.
• Rental fundamentals continued to strengthen as limited clinical availability supported average asking rents in the $25–$30 PSF NNN range, with top-tier Class A medical office properties continuing to command premium lease rates.
• Healthcare systems continued expanding their outpatient footprints across high-growth suburban markets, with providers such as Kelsey-Seybold, Memorial Hermann, and Houston Methodist driving new development in Cypress, Katy, and Fort Bend County to meet growing patient demand.

 

Houston Demographics

Source: Oxford Economics

• Unemployment Rate: 4.7%
• Households: 2,865,924
• Current Population: 8,020,722
• Median Household Income: $83,325

 

Rents

Average asking rents reached $30.55 per square foot during Q2 2026, representing a 0.8% year-over-year decline. While annual rent growth remains modestly negative, the historical trend shows rents have generally held near the $30 per square foot range over the past several quarters, suggesting pricing has largely stabilized following several years of expansion.

 

 

Vacancy

The vacancy rate declined to 15.4% in Q2 2026, extending the gradual stabilization that began late last year. Historical trends show vacancy has eased from its recent peak as new deliveries slowed, although negative quarterly absorption indicates leasing demand softened during the period. Even so, the limited construction pipeline should continue supporting market fundamentals over the coming quarters.

 

Vacancy Rate

Source: CoStar Group, Inc.

Construction

Development activity continued to slow, with just 85,510 square feet under construction and 26,520 square feet delivered during the quarter. The construction graph illustrates a dramatic pullback from the nearly 2.0 million square feet underway in 2023 and 2024, indicating developers have significantly reduced new starts as the market works through recent supply additions.

 

SF Under Construction

Source: CoStar Group, Inc.

 

Sales

The Houston medical office investment market recorded 72 sales during Q2 2026, with properties trading at an average of $299 per square foot. Average cap rates increased to 6.9%, reflecting more conservative pricing and higher return expectations amid today’s financing environment. Despite that shift, transaction activity remained healthy, underscoring continued investor demand for well-located healthcare assets with durable occupancy fundamentals.

 

By the Numbers

Q1 2026 | Source: CoStar Group, Inc.

• # of Sales: 72
• Cap Rate: 6.9%
• Price Per SF: $299
• Vacancy Rate: 15.4%
• Rent Growth: -0.8%
• Asking Rent Per SF: $30.55
• SF Under Construction: 85.5K
• SF Delivered: 26K
• SF Absorbed: 75K