Wednesday, November 11, 2026Commercial real estate news
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Medical office investment and development / NEWS

Texas Medical-Office Pricing Diverges as Borrowing Costs Rise

A Partners Real Estate executive describes a widening gap between medical-office properties perceived as safe and those seen as riskier, while the firm develops an Austin healthcare project.

Markets & ResearchNovember 12, 2026 · 2 min read

Rates and property pricing

Texas medical-office investment pricing has diverged according to buyers’ perceptions of lease risk, Ryan McCullough, a partner and Austin managing director at Partners Real Estate, wrote in a Nov. 12 commentary published by REBusinessOnline. His firm is also developing Easton Park Medical Center, a 48,000-square-foot healthcare project in Austin, the publication reported. Rising Rates, Split Market: How Higher Interest Rates Are Reshaping The Texas Medical Office Market

Early in 2026, McCullough said, properties regarded as safer, including those with national tenants on long leases, traded at capitalization rates at or below all-in borrowing rates of 5.75% to 6.25%. Properties viewed as riskier, including those with shorter leases to local or regional tenants, traded at cap rates in the mid-7% range. Rising Rates, Split Market: How Higher Interest Rates Are Reshaping The Texas Medical Office Market

Borrowing rates have since risen to nearly 7%, he wrote, but pricing for properties perceived as safer has not adjusted materially. He said vacancy, rents and loan defaults have remained relatively unchanged even as buyers focus on tenant credit and lease duration. Rising Rates, Split Market: How Higher Interest Rates Are Reshaping The Texas Medical Office Market

Inventory and development

McCullough attributed some of the low-cap-rate pricing to demand from 1031 exchange buyers. Separately, he said there is little inventory perceived as safe, particularly in markets such as Austin. He expects debt issued at low fixed rates in 2021 and 2022 to mature and prompt more owners to sell over the next 12 months; that is a forecast, not a list of announced sales. Rising Rates, Split Market: How Higher Interest Rates Are Reshaping The Texas Medical Office Market

The commentary reported that the 10-year Treasury yield rose about 65 basis points from mid-August to 5.29% in early October, then fell below 5% toward the end of October. Citing Revista Med, McCullough put the current spread between medical-office cap rates and the 10-year Treasury at about 223 basis points, compared with a 10-year average of about 363 basis points. Rising Rates, Split Market: How Higher Interest Rates Are Reshaping The Texas Medical Office Market

REBusinessOnline described medical-office development supply as insufficient relative to anticipated demand in growing Texas markets. Beyond identifying Partners as Easton Park’s developer and giving the project’s size and city, the report did not provide a construction or completion timeline. Rising Rates, Split Market: How Higher Interest Rates Are Reshaping The Texas Medical Office Market

interest ratescap ratesmedical officeinvestment salesdevelopment