Healthcare Real Estate Trends Reflect Resilience, Outpatient Momentum, and Returning Capital
Healthcare real estate entered 2026 in much the same position it ended in 2025: steady, focused, and largely insulated from the volatility affecting other property types. Across South Puget Sound, providers continued to lease, expand, and invest with confidence, reinforcing healthcare’s reputation as one of the most defensive asset classes in commercial real estate. Vacancy remains tight across most submarkets and well-located buildings are leasing quickly.
Tenant demand in Q1 centered on outpatient space, particularly multispecialty clinics, ambulatory surgery centers, and behavioral health users. Properties near hospitals, dense residential nodes, and major retail corridors continued to outperform, while functional layouts, modern infrastructure, and strong parking ratios remained non-negotiable. With limited new construction in the pipeline and absorption outpacing deliveries nationally, quality space is leasing quickly and rents continue pushing higher.
Health systems and larger physician groups drove much of the early year activity, expanding outpatient footprints as care continues shifting from hospital campuses into community-based settings. Advances in medical technology and evolving reimbursement structures are reinforcing this trend, driving demand for off-campus clinics, surgery centers, and specialty care space. Lease terms continue to trend longer as practices lock in space, protect against future rent escalations and most importantly receive the largest possible Tenant Improvement allowance.
On the investment side, capital markets are showing real signs of thaw. Cap rates have begun compressing for high-quality, credit-anchored assets, and institutional buyers are re-engaging alongside private and owner user investors. Transaction momentum that picked up in late 2025 has carried into Q1 2026, with well maintained, stable tenancy assets drawing the most attention.
With national occupancy expected to push toward 93% to 94% in 2026, constrained supply, and improving liquidity, healthcare real estate enters the balance of the year from a position of strength. Steady demographic tailwinds and durable, need-based demand position the sector to outperform.
South Puget Sound 1Q26 Insights
| Total SF | 8,690,241 |
| Vacancy | 2.78% |
| Vacant SF | 241,958 |
| Average Class A Asking Rent PSF NNN | $33.00 |
| Average Class B Asking Rent PSF NNN | $27.00 |
| Average Months to Lease | 3-9 Months |
| Average Market Sale Price PSF | $320.00 PSF |
| Average Market Cap Rate | 6.75% |
| Average Months to Sale | 4-9 Months |
The information in this update was composed by the Kidder Mathews healthcare and office brokerage team of 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 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 54 million square feet of space, and conducts 2,700 appraisal, consulting, and cost segregation assignments annually. For more information, visit kidder.com.
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Contact
Drew Frame, SIOR, Senior Vice President
Ryan Kershaw, Investments Specialist
Will Frame, Regional President of Brokerage, Pacific Northwest
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