Healthcare CRE tightens as New Jersey demand grows in Q1 2026

Team Lizzack-Horning of The Clinical Group

The U.S. healthcare commercial real estate (CRE) market enters 2026 facing constrained supply, steady demand, and an ongoing shift toward outpatient care. These trends are particularly evident across New Jersey, where limited inventory and high occupancy are tightening availability across core submarkets.

Following years of elevated borrowing costs and cautious development, medical office building (MOB) construction has dropped to its lowest level in more than a decade. Despite this slowdown, demand remains strong, supported by the essential nature of healthcare services and the continued growth of the 65+ population.

Nationally, MOB occupancy remains stable, with vacancy rates between 7% and 9%, while new construction deliveries are projected to fall by 26% year-over-year in 2026. This supply-demand imbalance continues to drive rent growth and attract investment capital seeking stable returns.

Investment activity is also rebounding, with healthcare systems and investors repositioning portfolios to prioritize outpatient-focused assets and liquidity.

New Jersey Spotlight

In New Jersey, the shift toward outpatient care is especially pronounced, driven by dense population centers and aging suburban corridors.

The state is experiencing a bottleneck in Class A medical space, with limited new construction contributing to constrained supply in key healthcare hubs such as New Brunswick, Hackensack, and Cherry Hill. As a result, premium assets are commanding significant rent and pricing premiums.

New Jersey continues to lead in adaptive reuse strategies, with healthcare providers repurposing vacant retail centers, big-box properties, and traditional office space into multi-specialty medical facilities. At the same time, consolidation across health systems is influencing real estate decisions, as providers look to improve efficiencies and offset rising labor costs.

Despite broader national headwinds, New Jersey remains a target market for expansion, particularly in high-income northern and central submarkets where providers are seeking to grow market share.

Northern New Jersey by the Numbers (Q1 2026):

• Total sales: 38 transactions

• Total sales volume: $49.0 million

• Total sales square footage: 312,003 s/f

• Total lease transactions: 109

• Total lease square footage: 233,555 s/f

Average asking rent: $24.79 psf

Across the region, MOB occupancy ranges from approximately 94.5% to 96% in core submarkets, while new inventory growth remains below 1%. Rent growth continues to climb, particularly in high-demand corridors.

With ground-up development limited, adaptive reuse has become a primary strategy. Healthcare providers are increasingly moving into former retail corridors throughout Bergen, Monmouth, and Camden counties. New projects are also requiring significant pre-leasing, often reaching 80% to 100% occupancy before construction begins.

Looking Ahead

As the market moves into the remainder of 2026, several factors are expected to shape the healthcare CRE landscape.

Providers unable to secure traditional medical office space will continue migrating toward retail storefronts, resulting in more complex lease structures and specialized infrastructure requirements. At the same time, economic uncertainty and expectations that interest rates may remain elevated into late 2026 are likely to keep development activity constrained.

Investment in building technology is also increasing, with a focus on smart medical office buildings that integrate telehealth capabilities and advanced patient flow systems to maximize operational efficiency.

Regulatory pressures and cost concerns are expected to drive further emphasis on outpatient care delivery, as providers shift services away from hospital campuses and into more cost-effective, community-based settings.

The market is expected to remain bifurcated, with large health systems continuing to expand their outpatient footprints, while smaller and independent practices face increasing competition for high-quality space.

As a result, early lease renewals, strategic site selection, and access to well-located assets will become increasingly critical. In New Jersey, the flight to quality may evolve into a broader scramble for space as supply remains constrained.

About the Report

This analysis reflects Q1 2026 trends in the healthcare real estate sector, including supply constraints, investment activity, and regional performance across key Mid-Atlantic markets.