- Updated: October 14, 2026
- Originally Published:
VIP Structures has been consistently involved with medical office space since 2004, as a developer, design-builder, and landlord. That year, VIP Development Associates bought the then-vacant O’Neill Building at 1304 Buckley Road in Syracuse, NY, with plans to redevelop it as Class A medical office space. VIP’s team renovated the 105,000 SF, three-story building, adding a glass atrium that brings natural light through all three floors, a covered patient drop-off, and new energy-efficient lighting and HVAC. Today, VIP owns and manages it as a multi-tenant medical and office building with healthcare providers and professional office tenants on all three floors. Tenants work with VIP as both landlord and design-builder.
During our involvement with medical office space, there has been a rising demand for such space across the country. That demand has been driven by a number of factors such as an aging population, advancements in medical technology that make more treatments available and allow more procedures to be done outside of a hospital, and increased healthcare utilization brought about by the Affordable Care Act.
That demand has held. Demographics and the steady move of care out of hospitals and into outpatient settings continue to drive it. According to CBRE’s U.S. Real Estate Market Outlook 2026, average medical outpatient building rent is projected to climb to a record high in 2026, with rent growth accelerating to 1.4% from 0.9% in 2025. CBRE also expects occupiers to keep pursuing lower-cost options, including conversions of obsolete office and retail buildings.
For practices, that can mean fewer ready-made choices and more reason to think carefully before signing. The considerations below first appeared in 2017, and they still apply.
#1: Location
Arguably the most important factor in any real estate decision is location, and medical office space is no exception. It is desirable to be in a location that is highly visible and has easy access to highways and other arterial roads. Some may argue that those factors are less important to a medical office than a traditional retail business, but the easier it is for patients to find the practice and get to a location, the better the chance for long-term success.
When shopping around for a space, practices should try to obtain data on traffic patterns and distance from major routes. They should also evaluate the visibility of the property and the general environment of the area surrounding it in terms of aesthetics, types of businesses or residences in the area, safety, etc.
Being in close proximity to hospitals, labs, complementary specialties, and pharmacies is also important. With the current emphasis on collaboration between medical providers and each provider being part of an overall continuum of care, being close to other healthcare entities makes it easier for practices to form partnerships and increases the possibility of “one-stop shopping” for patients.
#2: Patient demographics
In many ways, the question of patient demographics goes hand-in-hand with the location decision. Patients naturally prefer to visit medical offices close to where they live or work. It is important to understand the age, income, education levels, and other demographics since they largely determine the neighborhoods where those patients will be located in a given market. It can also impact the type of space and accommodations expected by the patient base. For example, a highly affluent patient population may expect cutting edge facilities, extensive amenities, and lots of external “curb appeal”, whereas a blue collar population might be comfortable in a less lavish space.
Part of the demographics equation isn’t just the composition of the current patient base, but identifying potential growth areas and projecting what the patient base might look like in the future. Population demographics are a moving target and are constantly changing, so to the extent that it is possible, practices should try to anticipate trends and plan ahead.
Of course, many practices won’t have the time or resources required for a demographic analysis. Commercial real estate firms may be able to help in that regard as they usually have access to basic demographic data about the market. If a practice is trying to cater to a highly specific demographic audience, it may be worth the money to hire a market research firm to conduct an analysis.
#3: Building type
Medical office space is available in a variety of building types including stand-alone buildings, hospital-owned properties, office parks, and even in strip malls and retail storefronts. All of these location formats have their plusses and minuses. They vary in terms of accessibility, parking, foot traffic, prestige, the degree to which the setting feels “clinical”, potential for tenant improvements and build-outs, and the extent to which they offer discretion for patients who may desire privacy when entering some types of practices. There is no one right answer and each practice has to weigh which of those factors are most important and how well a particular building type meets those priorities.
It is likely that when practices look for medical space, they will encounter office spaces designated as Class A, B, or C. These terms can be a bit confusing to those who don’t deal regularly with commercial real estate because there really aren’t exact definitions of what distinguishes a Class A space from a Class B or C. The separations are a bit relative and more of a continuum than distinct buckets.
Generally speaking, Class A buildings are the most prestigious in the market. They will have higher quality finishes, the most advanced building systems, better accessibility, and very prominent spaces in the market. They will also have higher rents. Class B properties are what might be considered “good” or “above average,” are more affordable than Class A but are not the best in a given market. Class C is what might be categorized as “no frills” or “functional,” and tenants sacrifice aesthetics, location, accessibility, and/or other considerations in exchange for lower costs. This is another case where there is no one right answer. Patient demographics and the image that the practice wants to convey to the public should inform the decision. Being located in a Class A space will certainly offer prestige and credibility to the practice, but some practices might flourish in a space that is below Class A.
#4: Competition
There are a lot of reasons why it’s important for a practice to have thorough knowledge of its competitors in the market, and making an informed decision about office space is one of them. In general, it is better not to be located in a space close to other practices in the same field. That can lead to patient confusion (potentially mistaking one practice for another) and will prevent a practice from fully realizing the benefits of a location.
It is worth taking the time to research which, and how many, competitors are near a location that is under consideration, especially if the practice is new or moving into a new area. Of course, this will be less of a consideration in specialties where there is a shortage of providers or strong growth in demand; but even in those situations, strategically locating away from the competition may allow a practice to tap into underserved portions of the market.
#5: Space requirements
Understanding space requirements is fundamental before deciding on how much is actually needed. A space consultant can help you visualize the medical office for you. Adoption of electronic health records (EHR) has caused a change in the space requirements of many practices since it has reduced the need for record storage and filing cabinets. In response to that trend, practices might simply use less space or they might put the same amount of space to better use with more exam rooms or patient consultation spaces.
In addition to how much space is needed, another key concern is what kind of special requirements practices will have regarding the utilization of space. Many will require facilities that can accommodate the disposal of biohazardous waste or the operation of specialized equipment, like lasers or x-ray imaging units. Getting a space ready for those types of operations may very well incur additional costs and there is even the possibility that a landlord may be unwilling or unable to make the needed changes.
#6: Patient accommodations and amenities
An overall trend in healthcare over the past few decades has been the industry becoming more consumer-oriented. In terms of medical office space, this has led (in some cases) to an evolution of clinical environments becoming “softer” with a more spa-like feel. Amenities such as relaxing common spaces, gardens, and cafes within medical facilities have become more common. Such touches may seem unimportant from a pure care perspective, but they can strongly influence the way patients perceive and experience a practice.
#7: Workplace environment
While many of the considerations that go into a medical office space choice are centered on patient needs and practice requirements, it’s important to keep in mind that these offices are workplaces. Providing a productive, safe, appealing, and comfortable environment for the practice’s employees is a key concern. We’ve also discussed current trends in general office space design in a past post. Some of those trends may not fully apply in a medical setting, but healthcare work environments are being transformed by technology and are trending more toward naturalistic environments, along with other sectors of the economy.
#8: Understanding the costs and timelines involved
As a rule, medical office space is more expensive and time consuming to develop than general office space. It is important for potential tenants to be realistic about costs and timelines for improvements and specialized build outs to a space. This is especially the case with spaces that will be used for surgery, x-rays, or those that require specialized plumbing.
As the list of factors above shows, choosing a medical office space for a practice is not a simple process. It can be frustrating or even overwhelming for organizations that are already focused on the demanding work of treating patients. But it is a decision that is important to get right. Beginning the process by firmly understanding the practice’s needs, knowing the right questions to ask, having realistic expectations, and working with potential landlords or leasing agents to find the right match give a practice the best chance of landing in the right spot.
Update: What has changed since originally posted in 2017
Build-out costs are worth pricing with a current number. Medical space has always cost more to fit out than general office space. JLL’s 2026 Medical Outpatient Building Fit-out Cost Guide puts the national average all-in fit-out cost at $412 per SF, measured from a warm white box condition, with hard costs making up $226 per SF of that total. JLL also points to uneven subcontractor capacity driving bid volatility, particularly in high-growth metros, and notes that higher-acuity projects can function like mini-hospitals from a power and MEP standpoint. Scope matters, so a national average is a starting point for a conversation, not a budget.
Converted buildings are a bigger part of the picture. Many practices now look at former office and retail buildings, not just purpose-built medical space. A conversion can be a practical route to the right location. It also raises questions a lease alone will not answer: what the existing structure can support, whether plumbing and mechanical systems can handle medical use, and what is behind the walls. JLL’s guide notes that providers are favoring renovations and conversions, which bring more phasing and infrastructure complexity and more variability in cost. According to Construction Dive’s coverage of the guide, the $412 average does not include structural and infrastructure upgrades or demolition and phasing constraints. Looking into those conditions early gives an Owner and a practice more information to work with before committing to a space.
Planning a medical office project?
Whether you are building new, converting an existing building, or deciding between the two, early decisions on site, scope, and budget can shape what options remain later. See how VIP approaches Healthcare and Medical Office projects and Adaptive Reuse.
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