Medical office properties are purpose-built or converted facilities housing healthcare providers including physician practices, surgical centers, diagnostic imaging, physical therapy, and specialty clinics. Medical office leases are among the most complex in commercial real estate due to significant tenant improvement requirements, specialized utility provisions, regulatory compliance obligations, and the strategic importance of location to healthcare referral networks. The sector has experienced strong institutional investment demand driven by the stability of healthcare tenants and the difficulty of relocating established practices.
Medical office leases are typically modified gross or triple-net structures, depending on property type and location. Hospital-adjacent medical office buildings (MOBs) often use gross leases with hospital-managed operating expenses, while freestanding medical properties are more commonly NNN. Tenant improvement allowances in medical office are among the highest in commercial real estate, reflecting the cost of plumbing, medical gas systems, lead shielding for imaging, and other specialized infrastructure - typically ranging from $80 to $200 per RSF in established markets.
Physician practices across all specialties, dental practices, physical and occupational therapy clinics, imaging centers, urgent care operators, surgery centers, dialysis providers, and behavioral health practices. Medical tenants are prized for long lease terms, high renewal probability (due to the cost and disruption of relocating a medical practice), and creditworthy payers including large hospital systems and established practice groups.
These fields are most important when abstracting a medical office lease. Click any field to learn what it means and where to find it.
Lextract automatically checks medical office leases against these red flag rules during extraction:
Medical office leases require extraction of specialized provisions not found in standard commercial leases: HIPAA compliance obligations affecting shared common areas, medical waste disposal responsibilities, required utility provisions (emergency power, medical gas), and healthcare-specific permitted use definitions that affect which specialties can operate in the space. Assignment clauses in medical office leases often include restrictions on transfers to competing healthcare systems or require landlord consent for practice acquisitions, making them especially important to extract for healthcare acquirers conducting due diligence.
Medical office build-outs require specialized infrastructure not needed in standard commercial space: plumbing in every exam room, medical gas systems (oxygen, nitrogen, nitrous oxide), emergency backup power generators, lead-lined walls for X-ray rooms, specialized HVAC for infection control, and ADA-compliant fixtures throughout. These costs routinely reach $150–$250 per RSF for new medical suites, making large TI allowances essential for attracting medical tenants.
The federal Stark Law (physician self-referral law) and Anti-Kickback Statute impose strict requirements on financial arrangements between healthcare providers and those who refer patients to them. Medical office lease terms and assignment provisions can implicate these laws if a lease transfer creates a compensation relationship that could influence referral patterns. Healthcare tenants and their landlords should ensure lease assignments comply with the fair market value and commercial reasonableness requirements of Stark safe harbors.
Medical practice acquisitions - whether by a hospital system, private equity group, or another practice - typically constitute an assignment of the lease requiring landlord consent. Healthcare landlords sometimes include specific provisions addressing practice acquisitions, including change-of-control definitions that trigger consent requirements even when the legal entity remains the same. Lease abstraction for medical practices being acquired or acquiring should specifically flag assignment and change-of-control provisions.
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