The Houston healthcare real estate market continued to expand in the suburbs in the first half of 2019. Major health systems are investing in expanding their suburban footprint through satellite campuses and outpatient centers to accommodate Houston's growing population. Outpatient clinics and services now account for almost half of hospital revenues. Several health systems completed expansions or announced new projects in the suburbs. The medical office market saw increased vacancy and lower investment sales volumes compared to previous years, though rental rates increased slightly. Overall, the outlook for Houston's healthcare real estate remains positive as the sector continues to be a major driver of the local economy and attracts further investment.

1. Houston healthcare real estate market continues
to expand in the suburbs
Research &
Forecast Report
HOUSTON | HEALTHCARE
Mid-Year 2019
The Houston healthcare real estate market continued to expand
over the first half of 2019 as Houston’s leading Health Systems
grow to accommodate Houston’s rapidly increasing population.
These expansions are not confined to just the Texas Medical
Center as providers are investing a significant amount of capital
in expanding their suburban footprint at satellite campuses and
outpatient centers throughout the metropolitan area.
For the third year in a row, the top Houston-area hospitals
reported average outpatient revenues to account for almost half
of all revenues, slightly less than revenues generated by inpatient
services.
Outpatient clinics are more important than ever before as they
become the primary delivery vehicle for care. The traditional hub
and spokesmodel in healthcare, which puts hospitals at the center
of care delivery, is changing to focus more on ambulatory care.
>> MD Anderson Cancer Center opened its West Houston Outpatient
center in June.
>> UTMB Health opened its new Clear Lake Campus in the former
Bay Area Regional Hospital in March.
>> Memorial Hermann completed a $25 million-dollar expansion at
its Cypress Hospital location.
>> Houston Methodist The Woodlands announced a new $240
million, 100-bed patient tower, as part of an expansion of their
Woodlands Campus, as well as a new 150,000 square foot
medical office building on their Clear Lake Campus.
>> HCA Houston Healthcare Tomball announced a redevelopment of
the campus with plans for a new 50,000 square foot MOB..
>> HCA acquired all 24 MedSpring Urgent Care centers in Austin,
Dallas and Houston from Fresenius Medical Care which included
even (7) Houston area locations.
>> CHI St. Luke’s is preleasing a new 60,000 SF Medical Office
Building at The Vintage.
Lisa Bridges Director of Market Research | Houston
Healthcare Trends Commentary by Coy Davidson
Summary Statistics
Houston Medical Office Market
Mid-Year
2018
Year-End
2018
Mid-Year
2019
Vacancy Rate 13.0% 13.4% 13.8%
Net Absorption 102,187 204,798 -160,751
Deliveries 276,463 230,344 232,222
Under Construction* 567,297 430,147 673,720
*Under Construction excludes hospitals, but includes the medical office buildings within the hospital
complex
Asking Rents
Per Square Foot Per Year
Average $25.07 $24.53 $25.17
Class A $28.54 $29.60 $29.36
Class B $24.75 $23.56 $24.34
.
Market Indicators
Relative to prior period
Annual
Change
Semi-Annual
Change
Semi-Annual
Forecast*
VACANCY
NET ABSORPTION
NEW CONSTRUCTION
UNDER CONSTRUCTION
*Projected

2. 0
200,000,000
400,000,000
600,000,000
800,000,000
1,000,000,000
1,200,000,000
Rolling 4-Quarter Volume Quarterly Volume
$0
$100
$200
$300
$400
$500
$600
Houston United States
Mid-Year 2019
NO. OF PROPERTIES: 13
TOTAL SF: 0.5M
MEDIAN $/SF: $331
MEDIAN CAP RATE: 8.1%
Sales By Total ($)
Average Price Per SF
Sales Activity
Source: Real Capital Analytics
`25.4%
5.7%
10.0%
68.3%
26.1%
22.2%
34.0%
30.6%
45.9%
47.7%
27.4%
42.8%
1.1%
43.7%
0.8% 42.8% 11.0%
0.0%
8.4%
2015 2016 2017 2018 2019 YTD
Cross-Border Institutional REIT/Listed Private User/Other
Buyer Composition
2 Houston Research & Forecast Report | Mid-Year 2019 | Healthcare | Colliers International
Healthcare Trends - continued
>> Kelsey-Seybold Clinic broke ground on a new 5.5-acre clinic in
Kingwood and is under construction on a 37,000 square foot
clinic in Grand Morton Town Center in Katy.
Medical Office Building Construction
232,222 square feet of new medical office space delivered in the
first half of 2019, which includes 8731 Katy Freeway (102,474 SF),
and 121 Vision Park Blvd (58,000 SF), in The Woodlands. Presently
there are 673,720 square feet of Medical Office space under
construction in the Houston Metro.
Investment Sales
Following several strong years for the medical office building
(“MOB”) sector, sales are off to a somewhat slow start in Houston
over the first half of 2019.
There were thirteen (13) Medical Office Building sales in the
Houston metro in the first half of 2019. compared to twenty-four
(24) MOB sales in 2018 and forty-one (41) in 2017.
Lower transaction volumes in the medical office sector despite a
vibrant healthcare industry in Houston is two-fold. Despite being an
asset class in high demand, transaction volumes are down for all
asset classes in commercial real estate.
Secondly and probably the biggest reason is the lack of availability
of medical office buildings for sale, particularly high-profile
institutional-grade medical office buildings and multi-building
portfolios. There is plenty of investor interest in Houston armed
with capital to deploy, but deals are difficult to come by in this stage
of the cycle and year-to-date sales volume is significantly down
from 2018.
Notable Sales in 2019 include:
>> Welltower acquired a 99,000 square feet MOB as part of a
portfolio sale at 5420 West Loop South in Bellaire.
>> Altera Development acquired 800 Peakwood (98,105 SF) and
17045 St. Edward Street (40,628 SF) in North Houston.
>> CHI St. Luke’s Health Sugar Land Medical Plaza (120,956 SF)
>> Kindred Rehabilitation Hospital Northeast Houston, a two-story,
46-bed inpatient rehabilitation hospital at 18839 McKay Blvd. in
Humble, sold to a health care real estate investor.

3. Job Growth & Unemployment
(not seasonally adjusted)
UNEMPLOYMENT 5/18 5/19
HOUSTON 4.2% 3.2%
TEXAS 3.6% 2.9%
U.S. 3.6% 3.4%
JOB GROWTH
Annual
Change
# of Jobs
Added
HOUSTON 2.6% 79.8K
TEXAS 2.4% 301.2K
U.S. 1.5.% 2.3M
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
$24.00
$25.00
$26.00
$27.00
$28.00
$29.00
$30.00
Class A Rents Class A Vacancy
*Vacancy percentage includes direct and sublease space.
10.00%
11.00%
12.00%
13.00%
14.00%
15.00%
16.00%
$20.00
$22.00
$24.00
$26.00
Class B Rents Class B Vacancy
*Vacancy percentage includes direct and sublease space.
Medical Office
CLASS A RENTS AND VACANCY
CLASS B RENTS AND VACANCY
3 Houston Research & Forecast Report | Mid-Year 2019 | Healthcare | Colliers International3
Leasing Activity
The majority of healthcare leasing activity in the greater Houston
area continues to be driven by major health systems and larger
physician organizations as the push to the suburbs continues in
both Medical Office Buildings and Retail Centers.
>> MaSThercell leased 32,100 square feet at 253 Medical Center in
Webster.
>> Houston Methodist Hospital leased 12,890 square feet at the
Boardwalk at Towne Lake in Cypress, expanded their League City
clinic at the Tuscan Lakes Professional Building to 19,546 square
feet and leased a 6,875-square-foot retail space at Tomball
Marketplace.
Vacancy & Availability
Houston’s citywide MOB vacancy rate increased 40 basis points
from 13.4% in Q4 2018 to 13.8% in Q2 2019. Currently, 6.4M SF of
direct space and 0.3M SF of sublease space is available. Available
space differs from vacant space in that it includes space that is
currently being marketed for lease, but may be occupied with a
future availability date. In contrast, unoccupied is truly vacant and is
available immediately.
Rental Rates
Houston’s MOB average asking rental rate increased during the
first half of 2019 by 2.6% from $24.53 per SF to $25.17 per SF.
The average asking rental rate increased slightly on an annual basis
from $25.07 per SF. The average asking rental rate for Class A
buildings increased from $28.54 to $29.36 per SF on an annual
basis.
Outlook
The outlook for Houston’s healthcare real estate market remains
positive. Healthcare continues to be a primary employment
growth sector for the city as Houston’s top health systems
remain committed to both growth in the Texas Medical Center and
suburban locations. New supply of medical office inventory and
tenant demand appear to be in balance in the near term. Houston’s
reputation as a major healthcare city will continue to attract interest
from investors in the Healthcare real estate sector.

4. 4
Member Institutions
4 Houston Research & Forecast Report | Mid-Year 2019 | Healthcare | Colliers International4 Houston Research & Forecast Report | Mid-Year 2019 | Healthcare | Colliers International
Texas Medical Center
The Texas Medical Center (TMC) – the world’s largest medical
center – represents one of Houston’s major economic drivers and
core industries with an estimated regional annual economic impact
of $25 billion. TMC is also one of Houston’s largest employers with
106,000 employees, including physicians, scientists, researchers
and other advanced degree professionals in the life sciences. The
internationally-renowned 1,345-acre TMC is the world’s largest
medical complex of member institutions, including leading medical,
academic and research institutions, all of which are non-profit
and dedicated to the highest standards of research, education and
patient preventive care. Over 50,000 students, including more than
20,000 international students, are affiliated with TMC, including
college and health profession graduate programs. More than 10
million patients visit TMC each year, including approximately 16,000
international patient visits.
Overall, the complex covers over 18 miles of public and private
streets and roadways, with 50M SF of existing patient, education
and research space. TMC has continued to grow and expand over
the past several decades with the majority of growth occurring in
the past ten years. The Center is located in the 110-acre University
of Texas Research Park, a joint effort between the University of
Texas Health Science Center, M.D. Anderson and General Electric
Healthcare. TMC spends billions of dollars on research and charity
care annually.
KATY
GALLERIA
BELLAIRE
RICHMOND
SUGAR LAND
PASADENA
LEAGUE CITY
IAH
HOU
EFD
CBD
H
610
290
249
90
59
59
610
288
225
146
I-45
I-45
I-10
I-10
8
8
8
8
SHIP
CHANNEL
GAL
BAY
6
The University of Texas M.D. Anderson Cancer
Center in the Texas Medical Center, ranked
#1 in U.S. News & World Reports “America’s
Best Hospitals 2018-2019” for cancer care.
Texas Medical Center
>> World’s Largest Medical Complex (1,345 Acres & 50M
Developed SF)
>> 8th Largest Business District in the U.S.
>> 106,000 Employees
>> 10M Patients Annually
>> 9,200 Patient Beds
>> 180,000+ Annual Surgeries
>> 13,600+ Annual Heart Surgeries
Houston MSA Health Care
>> 128 Hospitals
>> 9,200 Patient Beds
>> 16,070 Licensed Physicians
>> 336,600 Health Care & Social Assistance jobs
>> 2.4% Annual Employment Growth between 2017-2018
TEXAS MEDICAL CENTER LOCATION
>> Baylor College of Medicine
>> CHI St. Luke’s Health
>> Children’s Memorial Hermann
>> City of Houston Department of Health and Human
Services
>> Coleman HCC College for Health Services
>> DePelchin Children’s Center
>> Gulf Coast Regional Blood Center
>> Harris Health System
>> Health Science Center Texas A&M University
>> Houston Academy of Medicine
>> Houston Hospice
>> Houston Methodist
>> Institute for Spirituality and Health
>> LifeGift
>> MD Anderson Cancer Center - World’s largest cancer
center
>> Memorial Hermann
>> Menninger Clinic
>> Michael E. Debakey High School for Health
Professions
>> Michael E. Debakey Veterans Affairs Medical Center
>> Nora’s Home
>> Prairie View A&M University
>> Rice University
>> Ronald McDonald House Houston
>> Sabin Vaccine Institute
>> Shriners Hospital for Children
>> St. Dominic Village
>> Texas Children’s Hospital - World’s largest children’s
hospital and #1 in U.S. News & World Reports
“Americas Best Hospitals 2018-2019” for Pediatric
Cardiology & Heart Surgery
>> Texas Heart Institute
>> Texas Medical Center YMCA
>> Texas Southern University
>> Texas Women’s University
>> John P. McGovern Museum of Health and Medical
Science
>> The Texas Medical Center Library
>> Thermal Energy Corporation (TECO)
>> TIRR Memorial Hermann
>> University of Houston
>> University of St. Thomas
>> UT Health
>> UTMB Health

5. 5 North American Research & Forecast Report | 2014 | Office Market Outlook | Colliers International
Copyright © 2015 Colliers International.
The information contained herein has been obtained from sources deemed reliable. While
every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No
responsibility is assumed for any inaccuracies. Readers are encouraged to consult their
professional advisors prior to acting on any of the material contained in this report.
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5 North American Research & Forecast Report | 2014 | Office Market Outlook | Colliers International
Copyright © 2019 Colliers International.
The information contained herein has been obtained from sources deemed reliable. While
every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No
responsibility is assumed for any inaccuracies. Readers are encouraged to consult their
professional advisors prior to acting on any of the material contained in this report.
Colliers International | Houston
1233 West Loop South, Suite 900
Houston, Texas 77027
+1 713 222 2111
colliers.com/houstonhealthcareservices
Class A (25%) Class B (58%) Class C (17%)
Mid-Year 2019 Houston Medical Office Highlights
10.4M SF
24.6M SF
FOR MORE INFORMATION
Lisa Bridges CPRC
Director of Market Research | Houston
+1 713 830 2125
lisa.bridges@colliers.com
CONTRIBUTOR
Coy Davidson
Senior Vice President | Houston
+1 713 830 2128
coy.davidson@colliers.com
0.7M SF
7.5M SF
Houston’s healthcare and social
assistance job growth increased in the
first half of 2019 and has increased
7.0% in three years.
12-Month Percent Change June-June
2018 – 2019 2.3%
2017 – 2018 1.7%
2016 – 2017 3.0%
42.5M SF
Total Inventory
-161K SF
Net Absorption
13.8%
Vacancy
Houston Healthcare Industry
In The News
According to a new study from the American Enterprise
Institute’s Housing Center, Houston ranks 2nd among
the best U.S. metro areas for STEM workers.

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