Development costs continue to be high in 2026, and that has kept a downward pressure on construction levels. The chart below shows the annual project starts and completions as a percentage of the MOB inventory. From 2016 through 2022, we can see the number of projects breaking ground and delivering equated to an average of 1.6% inventory growth annually. Since 2022, when the cost of borrowing and building shifted up, the construction trend has been pointed downward. As of 3Q26, only 1% delivered in the previous twelve months, and only 1.1% broke ground. Lower supply growth paired with sustained demand is keeping occupancy levels high, the combined Top 100 metros have maintained an over 92% occupancy rate for the past 3 years. Within the Top 100, the markets with the lowest occupancy sit around 87%. Until construction activity moves materially up, these supply/demand conditions are unlikely to change.
