NJ medical office draws investor attention as healthcare tenancy differentiates the sector

By Jordan Sobel and Dan Bottiglieri, Cushman & Wakefield

New Jersey’s medical office investment market is demonstrating a level of buyer demand that increasingly distinguishes it from the broader suburban office sector.

The second quarter of 2026 offers a clear indication. Thirteen medical office properties between $2 million and $50 million traded across New Jersey for a combined $79.1 million, according to Cushman & Wakefield research. The average transaction totaled $6.08 million, or $198 psf. Activity was concentrated in Morris, Essex and Bergen counties, with larger medical office transactions accounting for a significant share of overall volume.

Perhaps more telling than transaction volume is who is buying and what they are willing to pursue. Investment buyers accounted for 77% of medical office transactions during the quarter and 87% of total dollar volume. Eighty-two percent of the properties that traded were fully leased.

Those numbers reflect what we are seeing in the market: Healthcare tenancy can provide an investment thesis that differs meaningfully from traditional office. Investors are evaluating the durability of medical demand, tenant tenure and location alongside the fundamentals of the underlying real estate.

Recent transactions show that buyer demand is not limited to one type of medical office investment.

At 175 Morristown Rd. in Basking Ridge, Cushman & Wakefield marketed a 26,063 s/f medical office building that was 100% occupied by five tenants, with an average tenant tenure exceeding 10 years. The property was anchored by Franklin Surgical Center and carried a 9.61-year weighted average lease term. The marketing process generated 14 written offers before the property sold for $5.525 million, or $213 psf, at a 7.86% capitalization rate.

In Westwood, 400 Old Hook Rd. presented a different investment profile. The 33,277 s/f property was 70% leased at the time of sale and anchored by Valley Health System, Englewood Hospital and CuratioCuralto Foot & Ankle. Ownership had invested more than $1.75 million in capital improvements, while the remaining vacancy created meaningful lease-up potential. Despite that execution component, the process generated 12 competitive written offers and the property sold for $4.35 million at an 8.3% in-place capitalization rate.

The contrast between the two transactions is notable. One offered stabilized occupancy, long-duration tenancy and durable cash flow. The other paired established healthcare tenancy with a clear value-creation opportunity. Both attracted double-digit written offers.

That breadth of demand is one reason medical office continues to distinguish itself within New Jersey’s broader office investment market.

That does not mean buyers are overlooking risk. Across New Jersey’s investment market, pricing remains disciplined, and investors continue to scrutinize lease rollover, tenant concentration, building condition and future capital requirements. The presence of medical tenants alone does not make an asset attractive. Location, tenancy, lease structure and basis remain critical to the investment decision.

Medical office, however, benefits from characteristics that can make well-positioned assets particularly compelling. Many healthcare providers require specialized buildouts and serve patient populations tied to their surrounding communities. Proximity to hospitals, health systems and established healthcare corridors can therefore be an important consideration for both tenants and investors.

The two recent sales demonstrate how those characteristics can translate into demand even when the underlying investment profiles differ. At 175 Morristown Rd., buyers responded to long-term tenancy and income stability. At 400 Old Hook Rd., they were willing to underwrite existing vacancy in exchange for the opportunity to add value to an asset with established medical tenancy in a strong healthcare location.

Heading into the remainder of 2026 and 2027, we expect that distinction to remain important. Investors will continue to be selective, but medical office properties with established healthcare tenancy, strong locations and credible income growth or lease-up opportunities should remain well positioned to generate interest.

The opportunity will not be limited to fully stabilized properties. Investors are demonstrating a willingness to consider vacancy and execution risk when the basis, existing tenancy and potential upside are compelling. At the same time, competition for stabilized medical office with long-term healthcare occupancy can create a deep buyer pool.

For owners considering a sale, that makes the story behind the real estate increasingly important. Investors are not treating all suburban office buildings alike. Tenant profile, lease structure, location and the ability to articulate a credible path forward can materially shape both the depth of the buyer pool and the ultimate execution.

New Jersey’s medical office market is providing evidence of that distinction now, and we expect it to remain one of the more closely watched segments of the state’s private investment market as 2027 approaches.

Jordan Sobel, director, and Dan Bottiglieri, senior associate, are members of Cushman & Wakefield’s Capital Markets Group in Morristown, NJ.