Texas ranks as one of the top states for medical office building investment, backed by rapid population growth and expanding health systems across major metros. More than 2,100 medical office properties are currently listed statewide at an average asking price of $326 per square foot. Hospital proximity, tenant credit quality, and lease structure vary widely across listings, and those factors determine whether a MOB cash-flows or sits half-vacant.
Before You Buy a Texas Medical Office Building
- Due diligence for Texas MOBs includes tenant lease audits, Phase I environmental reports, and property condition assessments before any offer goes binding.
- Commercial lenders typically require 25% to 35% down for medical office purchases, with loan terms tied to remaining tenant lease length.
- Confirm the parcel’s zoning permits medical use before contracting, because rezoning in Texas municipalities can stall a deal for months.
What You Need to Invest in Texas MOBs
- Most lenders require 25% to 35% down on medical office acquisitions, with loan terms tied to remaining lease length rather than a standard 30-year amortization.
- Run a Phase I environmental site assessment before closing, since former medical tenants may trigger hazardous-waste liability that transfers to the new owner.
- Secure tenant financials and payer-mix data showing what percentage of revenue comes from Medicare, Medicaid, and private insurance before underwriting the deal.
Acquisition Timeline for Texas MOBs
- Most buyers spend four to six weeks on initial due diligence, including Phase I environmental assessments, roof and HVAC inspections, and lease audits.
- Lender underwriting and appraisal for medical office buildings typically runs 45 to 60 days because specialized healthcare tenancy adds valuation complexity.
- Plan for a 90 to 120 day total timeline from executed letter of intent through closing, longer if seller financing or SBA loans are involved.
What Texas Medical Office Buildings Cost
- Texas medical office buildings average around $326 per square foot, so a 6,500 square foot single-tenant property typically prices near $2.1 million before closing costs.
- Tenant improvement allowances for medical buildouts run $40 to $80 per square foot depending on specialty, and those costs often fall on the landlord at lease signing.
- Structuring leases as triple-net shifts property taxes in San Antonio, insurance, and maintenance to the tenant, which can cut your annual operating expenses by 30% or more.
Can a non-doctor own a medical practice in Texas?
Texas follows the corporate practice of medicine doctrine, so non-physicians generally cannot own a medical practice directly. Investors can still own the medical office building and lease to providers like Baylor Scott & White, keeping real estate investment separate from clinical practice ownership.
What is the new building in the Texas Medical Center?
The Texas Medical Center regularly adds new clinical and medical office buildings as Houston ranked No. 1 nationally in total medical office square footage in 2023. Texas MOB listings average $326 per square foot, and major health system tenants like Baylor Scott and White make new TMC properties attractive to institutional investors.
What is the largest healthcare company in Texas?
Baylor Scott & White Health is the largest not-for-profit healthcare system in Texas, operating dozens of hospitals and clinics across the state. Its expansion fuels medical office building demand in markets like Dallas-Fort Worth, where investors target properties leased to major health systems for stable, long-term returns.
The Bottom Line Up Front
Texas medical office buildings are one of the strongest commercial real estate plays in the state right now. Population growth, aging demographics, and hospital system expansion drive tenant demand across Houston, Dallas, San Antonio, and Austin. But the gap between a profitable acquisition and an overpriced deal comes down to lease structure, tenant creditworthiness, and proximity to major hospital campuses.
Houston ranked first nationally in total medical office square footage in 2023, and Dallas currently has more than $500 million in office construction projects underway. Across the state, medical office space averages roughly $326 per square foot with a typical building size around 6,554 square feet. Cap rates for well-located MOBs with investment-grade tenants like Baylor Scott and White typically compress below general office rates. Investors targeting Texas need to evaluate each metro’s supply pipeline, tenant mix, and whether the property sits within a hospital campus or in a standalone location.
- Houston leads the nation in medical office square footage, making it the top Texas metro for MOB investment.
- Dallas has over $500 million in active office construction, signaling both demand and potential supply risk.
- Hospital campus proximity is the single biggest factor in tenant retention and long-term lease stability.
- Average Texas medical office pricing sits near $326 per square foot across more than 2,100 listed properties.
- Investment-grade health system tenants like Baylor Scott and White command lower cap rates but offer stronger credit.
A non-doctor’s role in owning a medical practice in Texas
Non-physicians can own medical office buildings in Texas without practicing medicine or holding any clinical credential. Texas law draws a firm line between real estate ownership and medical practice, which opens the MOB market to individual investors, REITs, private equity groups, and physician-investor joint ventures that pair clinical operators with outside capital. You own the building. You lease space to healthcare tenants, collect rent, handle property management decisions, and build equity in a commercial asset tied to the healthcare sector. The investor’s daily focus stays on occupancy rates, lease terms, capital improvements, and building condition. MOB owners can also use cost segregation to front-load depreciation deductions on the specialized buildout components that medical offices require.
| Investor Type | Typical Entry Structure | Key Advantage |
|---|---|---|
| Individual investor | Direct purchase, ~$326/SF statewide average | Full control over tenant selection and lease terms |
| Private equity fund | Pooled capital, multi-asset portfolio | Diversification across Houston, Dallas, San Antonio |
| Healthcare REIT | Publicly traded share ownership | Liquidity and passive income, no direct management role |
| Physician joint venture | Doctor-operator pairs with capital partner | Built-in anchor tenant cuts vacancy risk |
| 1031 Exchange buyer | Tax-deferred exchange from prior asset | Capital gains deferral into healthcare real estate |
| Developer-to-hold | Ground-up build, average 6,500 SF | Custom facility commands premium lease rates |
Texas draws MOB capital because sustained population growth and an aging demographic base fuel consistent demand for outpatient facilities across every major metro. Houston ranked first nationally in total medical office square footage in 2023, and the Dallas-Fort Worth metro has more than $500 million in active office development. Non-medical owners typically structure acquisitions as triple-net leases, where tenants cover property taxes, insurance, and building maintenance. That structure keeps the owner’s annual expenses predictable and narrows the management scope to capital planning, tenant retention strategy, and long-term building performance.
What is the new building in the Texas Medical Center?
The Texas Medical Center’s newest developments include multi-building research campuses, specialty hospitals, and freestanding outpatient facilities across Houston’s medical district. TMC is the world’s largest medical complex. Each new facility adds tenant demand for surrounding medical office space, and that pipeline of construction keeps rents rising and vacancy rates low for MOB investors positioned near the campus.
Before acquiring a medical office building near TMC, verify the property’s zoning classification with the City of Houston and confirm any deed restrictions that limit use to medical tenants. TMC-adjacent parcels sometimes carry covenants tied to the medical center’s master plan. Review the tenant roster for single-tenant concentration risk, and check whether existing leases include annual rent escalators pegged to operating expenses or a fixed percentage.
Investors targeting TMC-adjacent properties benefit from a built-in tenant pipeline. Physicians, diagnostic labs, specialty clinics, and outpatient surgery centers cluster near major hospital campuses to stay close to referral networks and shared imaging suites. That proximity drives occupancy rates that consistently outperform general commercial office space in the Houston metro. Purchase prices per square foot near TMC run higher than MOBs in suburban Texas markets like San Antonio or Fort Worth, but lower vacancy risk and stronger annual rent growth tend to offset the acquisition premium for investors holding five years or longer. Our Texas investor strategy guide covers hold-period planning for commercial acquisitions.
What is the largest healthcare company in Texas?
Texas houses several of the nation’s largest healthcare organizations. Tenet Healthcare in Dallas ranks among the biggest publicly traded hospital companies. Baylor Scott & White Health holds the title of largest not-for-profit system statewide. For MOB investors, proximity to these health systems directly shapes tenant demand, vacancy rates, and long-term lease stability.
- Tenet Healthcare: Headquartered in Dallas, Tenet operates hospitals, ambulatory surgical centers, and affiliated outpatient facilities across major Texas metros. Medical office buildings near Tenet campuses draw steady physician tenant demand from the system’s established referral networks.
- Baylor Scott & White Health: The largest not-for-profit system in Texas spans the Dallas-Fort Worth corridor and Central Texas with dozens of hospitals. MOB owners near Baylor Scott & White campuses see low vacancy rates because specialists cluster around the system’s referral infrastructure.
- Houston Methodist: Concentrated in the Houston metro, Houston Methodist’s ongoing campus expansions in Sugar Land, The Woodlands, and Baytown create new MOB development opportunities adjacent to each facility. Investor interest follows each announced expansion.
- MD Anderson Cancer Center: Located within the Texas Medical Center, MD Anderson draws oncology specialists and support providers who need nearby clinical office space. MOBs within a short radius of this campus command premium rents tied to the center’s global patient volume.
Living in a commercial building in Texas
Texas municipalities generally prohibit residential occupancy in buildings zoned for commercial use, including medical office buildings. Houston stands apart. It operates without a traditional zoning ordinance, giving MOB owners more mixed-use flexibility than any other major Texas metro and allowing investors to add residential elements without a formal city permit. Dallas, San Antonio, and Austin all require a permit or variance for any residential conversion.
| Metro | Zoning Framework | Residential Permit Required | Mixed-Use Flexibility |
|---|---|---|---|
| Houston | No traditional zoning; deed restrictions govern land use | Not required by city; deed restrictions may still apply | Highest among major Texas metros |
| Dallas-Fort Worth | Standard zoning with defined commercial districts | Conditional use permit or formal rezoning application | Restricted to designated mixed-use overlay areas |
| San Antonio | Unified Development Code with use categories | Specific use permit through city planning department | Available in select infill and transitional zones |
| Austin | Land Development Code with use designations | Conditional use permit or planned unit development filing | Permitted in vertical mixed-use zoning districts |
Beyond zoning, converting any portion of a commercial building for residential use triggers International Residential Code requirements for fire separation, egress windows, and dedicated HVAC systems. These upgrades apply whether the conversion is a full floor of apartments or a single caretaker unit within a medical office structure. Building departments in all four major Texas metros enforce these residential habitability standards uniformly. For MOB investors, the calculus favors keeping the property fully commercial. Standard commercial zoning means no special permits, no residential code retrofits, and no friction with neighboring tenants who expected a commercial corridor.
How much does a medical office building cost in Texas
Medical office buildings in Texas typically list between $250 and $450 per square foot, with statewide averages near $326 per square foot. A 6,500-square-foot single-tenant building in a suburban market outside San Antonio or Fort Worth might price around $2.1 million. Multi-tenant properties near major hospital campuses in Houston or Dallas regularly exceed $500 per square foot when anchored by credit-rated health systems on long-term leases.
Before you underwrite any Texas MOB acquisition, request the full rent roll with remaining lease terms, estoppel certificates from each tenant, and the property’s certificate of occupancy confirming medical use compliance. Verify the building meets current ADA accessibility standards and local fire code for clinical occupancy. Gaps in these documents signal deferred risk that directly affects your purchase price and your lender’s willingness to close.
Cap rates generally fall between 6% and 8% across Texas metros. Lease term is the biggest variable. Properties in Houston’s Texas Medical Center corridor see tighter caps where health systems sign 10- to 15-year triple-net leases. Secondary markets like El Paso, Lubbock, and Corpus Christi offer higher yields but carry greater tenant turnover risk. Building age also drives price separation: post-2015 construction commands a clear premium over older Class B stock, and properties with weighted average lease terms above seven years tend to secure stronger financing from commercial lenders.
How do lease structures protect a medical office building investment in Texas long term?
Medical office leases in Texas protect investors through longer terms, built-in rent escalations, and tenant responsibility for operating expenses. Most physician and hospital-system tenants sign 7 to 15 year leases with annual rent increases of 2% to 3%. These structures reduce turnover, stabilize cash flow, and create income predictability that few other commercial real estate sectors deliver.
- Triple net terms: Most Texas MOB leases shift property taxes, insurance, and maintenance costs to the tenant, shielding the owner from rising operating expenses that erode returns in other asset classes.
- Escalation clauses: Annual rent bumps of 2% to 3% are standard in physician and health system leases, keeping income ahead of inflation without requiring renegotiation at each renewal cycle.
- Tenant buildout anchoring: Healthcare tenants invest heavily in exam rooms, imaging suites, and specialized plumbing, making relocation expensive and lease renewals highly likely after the initial 7 to 15 year term expires.
- Creditworthy tenant base: Hospital-affiliated practices and regional health systems carry stronger credit profiles than typical retail or general office tenants, lowering the risk of missed rent payments or mid-lease defaults.
The Bottom Line
Medical office building investment in Texas comes down to three factors: legal structure, location, and lease terms. Texas law allows non-physicians to own medical office real estate outright, separating property ownership from clinical practice. That opens the asset class to investors who would otherwise sit on the sidelines. Buildings typically list between $250 and $450 per square foot statewide, with averages near $326, putting entry points within reach for individual and institutional buyers alike.
The state’s concentration of major healthcare systems, from Tenet Healthcare to Baylor Scott & White, creates tenant demand that most commercial sectors cannot match. Long-term lease structures tied to creditworthy medical tenants reduce vacancy risk and stabilize cash flow. Texas checks the boxes that matter for this asset class: growing healthcare demand, favorable ownership laws, and pricing that still leaves room for returns.
Frequently Asked Questions
Can you live in a commercial building in Texas?
Texas zoning codes generally prohibit residential occupancy in buildings zoned for commercial or medical office use. Converting a commercial space to residential requires a zoning variance or conditional use permit from the local municipality, which can take 60 to 120 days and is not guaranteed approval. Some mixed-use zoning districts in Austin, Dallas, and Houston allow live-work arrangements, but a standard medical office building classified under commercial zoning does not qualify. Investors should verify the property’s zoning designation with the county appraisal district before assuming any residential flexibility.
What is medical commercial real estate and how does it differ from general office space?
Medical commercial real estate includes buildings purpose-built or retrofitted for healthcare delivery: physician clinics, outpatient surgery centers, imaging facilities, and specialty practices. These properties differ from general office space in several ways. Buildout costs run higher due to plumbing for exam rooms, HVAC requirements for infection control, and ADA-compliant layouts. Lease terms tend to be longer, often 7 to 15 years, because tenants invest heavily in tenant improvements. Cap rates for Texas MOBs typically range from 5.5% to 7.5%, and vacancy rates historically stay below general office averages.
What is located at 12377 Merit Drive, Suite 500, Dallas, TX 75251?
This address sits in the Merit Drive corridor of Far North Dallas near the Galleria area, a well-established medical and professional office submarket. The location is close to Medical City Dallas and several specialty physician groups. Investors evaluating properties in this corridor should note that Far North Dallas consistently ranks among the top three DFW submarkets for medical office occupancy. Proximity to major hospital systems like Medical City and Texas Health Resources drives tenant demand. Verify current ownership, lease rolls, and zoning through the Dallas Central Appraisal District before making offers.
How do investors find hospitals or medical facilities for sale in Texas?
Start with commercial real estate listing platforms like LoopNet, Crexi, and CoStar, filtering by property type and Texas metros. Brokerage firms specializing in healthcare real estate, such as CBRE Healthcare and Colliers Medical Office, maintain off-market deal flow that never hits public listings. Texas Health and Human Services Commission publishes facility licensing data that can identify underperforming or closing facilities. Hospital acquisitions involve additional due diligence layers including Medicare certification transfer, certificate-of-need review where applicable, and existing physician contract assignments. Most institutional hospital sales close through broker-managed competitive bid processes.
What does medical property management involve for MOB investors?
Medical property management goes beyond standard commercial management. Property managers handle HVAC maintenance for systems that run longer hours than typical office buildings, medical waste compliance coordination, after-hours access for healthcare tenants, and specialized janitorial requirements including biohazard protocols. Management fees for medical office buildings in Texas typically run 4% to 6% of gross collected rent. Investors who self-manage save on fees but take on compliance risk. Third-party firms with healthcare experience reduce liability exposure, especially around OSHA and ADA requirements that apply specifically to clinical environments.
Why is Frisco attracting medical office investment?
Frisco added over 100,000 residents in the last decade, making it one of the fastest-growing cities in Texas. That population growth drives demand for outpatient healthcare services. Texas Health Frisco opened as a full-service hospital, and Baylor Scott and White expanded its presence along the Dallas North Tollway corridor. New medical office developments near these anchor hospitals benefit from built-in referral traffic. Average asking rents for Frisco medical office space have climbed steadily, and vacancy rates remain tight compared to broader DFW suburban submarkets. Investors target Frisco for its demographic tailwinds and high-income patient base.
Who is MedCore Partners and what role do they play in Texas MOB investment?
MedCore Partners is a Dallas-based real estate firm focused exclusively on medical office development and investment across Texas and the southern United States. They develop, acquire, and manage MOB properties, often building on or near hospital campuses through joint ventures with health systems. For investors, firms like MedCore represent both competition and potential partnership opportunities. Their development pipeline signals where institutional capital sees growth in Texas healthcare real estate. Tracking their acquisitions and groundbreakings through commercial real estate publications gives individual investors a read on which submarkets institutional buyers consider undervalued.
