Strong Leasing Activity and a Real Sense of Optimism Resulting in Positive Growth
The South Puget Sound Healthcare market remains a picture of strength as we close out the third quarter of 2025. Vacancy has compressed further to just 2.26%, reflecting sustained tenant demand and a lack of available quality product across key submarkets. With only 196,054 SF vacant out of 8.67 million SF, competition for medical space continues to intensify.
Healthcare systems and private equity-backed practices continue to expand into the region, pursuing off-campus opportunities to serve shifting demographics and patient preferences. Rent growth remains strong, with Class A product averaging $33.00 PSF, NNN and Class B averaging $27.00 PSF, NNN. The continued shortage of well-located space is driving a premium for institutional quality product.
Investor sentiment has strengthened notably through the quarter. While national transaction volume remains below pre-pandemic peaks, healthcare assets continue to outperform most other CRE sectors, anchored by resilient tenant activity and long-term stability. Cap rates have compressed with a sub 6% CAP transactions on the horizon, Institutional players are re-engaged with the market with a priority on the PNW, due to our national top ten metrics.
Across the U.S., medical office leasing remains one of the few sectors posting consistent growth, supported by demographic tailwinds, outpatient migration, and a steady flow of investor capital. The South Puget Sound market mirrors these national dynamics, offering a compelling mix of limited supply, strong tenant demand, and durable long-term fundamentals.
With strong absorption, tightening vacancy, and heightened investor interest, the South Puget Sound healthcare real estate sector is positioned for continued strength into Q4 and beyond.
South Puget Sound 3Q25 Insights
| Total SF | 8,690,241 |
| Vacancy | 2.26% |
| Vacant SF | 196,054 |
| Average Class A Asking Rent PSF NNN | $32.00 |
| Average Class B Asking Rent PSF NNN | $25.00 |
| Average Months to Lease | 3-9 Months |
| Average Market Sale Price PSF | $320.00 PSF |
| Average Market Cap Rate | 6.50% |
| Average Months to Sale | 4 – 9 Months |
The information in this update was composed by the Kidder Mathews healthcare and office brokerage team of Will Frame, Drew Frame, SIOR, and Ryan Kershaw.
Data source: CoStar
About the Frame Team
As members of the Kidder Mathews Healthcare and Office groups, Drew Frame, SIOR, Will Frame, and Ryan Kershaw are experts in healthcare and office services, specializing in landlord and tenant representation, as well as sales, including investment and owner/user. The team has completed over $243,000,000 in sales in the last 24 months and actively represent more than 3 million square feet of property. For more information, visit kmteamframe.com.
About Kidder Mathews
Kidder Mathews is the largest fully independent commercial real estate firm in the Western U.S., with over 900 professionals in 19 offices across Washington, Oregon, California, Nevada, and Arizona. We offer a complete range of brokerage, appraisal, asset services, consulting, and debt & equity finance services for all property types. Kidder Mathews averages over $9 billion in transaction volume, manages more than 58 million square feet of space, and conducts 2,400 appraisal, consulting, and cost segregation assignments annually. For more information, visit kidder.com.
Read the full report at the link below.
Contact
Drew Frame, SIOR, Senior Vice President
Will Frame, Regional President of Brokerage, Pacific Northwest
Ryan Kershaw, Investments Specialist
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