DFW’s medical office market showed clear signs of stabilization in Q1 2026 following a supply-driven slowdown throughout 2025. Vacancy declined to 11.4% after peaking near 12.0% late last year, as steady tenant demand continued to absorb newly delivered space. Absorption of 111,238 SF outpacing 36,046 SF of new deliveries highlights the resilience of occupier activity, particularly as healthcare providers expand to meet the needs of a growing population. At the same time, the construction pipeline has begun to moderate, which should help alleviate forward supply pressure. Rent growth has leveled off at 0.9% annually, signaling a transition to a more sustainable phase. Investment activity remained active, with 88 sales at a 6.4% cap rate, reflecting continued confidence in the sector.

 

Key Findings

• Market Vacancy and Demand: Vacancy is stabilizing after peaking near 12.0% in late 2025, as absorption continues to outpace new deliveries. Steady demand is supporting occupancy and aiding in the market’s rebalance.
• Rent Trends and Pricing: Rent growth has leveled off near cyclical highs, with asking rents holding in the mid-$33 per SF range, signaling a shift from expansion to a more stable pricing environment.
• Development and Investment Activity: Construction activity is moderating, easing future supply pressure, while investment remains active but selective. Capital currently favors high-quality suburban assets, offering stable yields and long-term demand fundamentals.

 

DFW Demographics

Source: CoStar Group, Inc.

• Unemployment Rate: 4.1%
• Households:3,077,210
• Current Population: 8,480,770
• Median Household Income: $95,589

 

Rents

Asking rents have entered a period of stabilization following several years of steady growth. After rising consistently through 2023 and 2024, rent levels have significantly plateaued around the mid-$33 per SF range over the past year. This leveling reflects a normalization in pricing as new supply has tempered landlord leverage, while still maintaining historically elevated levels. Despite slower growth, rents remain well-supported by durable healthcare demand and limited long-term space alternatives.

 

Market Asking Rent Per SF

Source: CoStar Group, Inc.

 

Vacancy

Vacancy increased throughout 2025, reflecting the impact of new supply deliveries on overall occupancy. After peaking late in 2025, vacancy has begun to show early signs of stabilization, declining slightly in Q1 2026. This shift suggests that tenant demand is starting to catch up with recent construction activity. While elevated compared to prior years, current vacancy levels remain within a manageable range for the sector. Improving absorption trends and a moderating development pipeline are expected to support further stabilization moving forward.

 

Vacancy Rate

Source: CoStar Group, Inc.

 

Construction

The healthcare development pipeline has begun to moderate after reaching elevated levels in 2024 and early 2025. Construction activity previously exceeded 1.2 million SF in 2024, contributing to rising vacancy as new space delivered to the market. More recently, the pipeline has trended downward to just under 1.0 million SF, signaling a slowdown in new starts and a more cautious approach from developers. This reduction in active construction should help limit additional supply pressure in the near term. As a result, the market is better positioned to absorb existing space.

 

SF Under Construction

Source: CoStar Group, Inc.

 

Sales

Transaction activity in the DFW medical office market slowed in Q1 2026, with 88 sales recorded, down from elevated levels seen throughout 2025. Despite lower volume, pricing fundamentals remain stable, particularly for higher-quality assets, as evidenced by continued growth in Class A pricing to $303 per SF. While capital markets remain selective, the consistency in pricing suggests that investor demand for medical office assets has not materially weakened, but rather shifted toward more disciplined underwriting and targeted acquisitions.

 

Private investors and owner-users remain the dominant buyers, reinforcing the sector’s reliance on local and regional capital. Overall, the market reflects a more measured investment environment, with capital concentrating on assets that offer durable income and long-term demand fundamentals.

 

Sale Price Per SF

Source: CoStar Group, Inc.

 

Cap Rates

Source: CoStar Group, Inc.

 

By the Numbers

Q1 2026 | Source: CoStar Group, Inc.

• # of Sales: 88
• Cap Rate: 6.4%
• Price Per SF: $325
• Vacancy Rate: 11.4%
• Rent Growth: 0.9%
• Asking Rent Per SF: $33.77
• SF Under Construction: 989K
• SF Delivered: 36K
• SF Absorbed: 111K