What it costs to build a medical office building in Pennsylvania in 2026
A 20,000 sq ft medical office building runs $8.0 million to $11 million, about $480 per sq ft all-in. On Pennsylvania's own rents, vacancy and lending terms the typical case does not pencil. Every figure below has its source; checked October 28, 2026.
Cost to build, typical case
| Land | $1,440,000 |
| Hard cost | $5,787,234 |
| Soft cost | $1,446,809 |
| Contingency | $434,043 |
| Interest reserve | $260,426 |
| Developer fee | $231,489 |
| Total, a 20,000 sq ft medical office building | $9,600,000 |
| Range, low to high case | $8,000,000 to $11,200,000 |
Matthews 2026: delivered MOB $400 to $560 per sq ft; Buildermuse shell $250 to $400 plus TI $100 to $350. Rule of thumb: $480 per sq ft all-in needs about $38 NNN at 8% yield on cost; new medical office only pencils pre-leased to a health system or a physician owner.
Would it get financed
- Loan a lender would size$4,154,961, limited by DSCR
- Rate and amortization7.00%, 25 years
- Equity required$5,445,039 (57% of cost)
- Net operating income, stabilized$440,496
- Yield on cost against target4.6% against 8.4%
- Debt service coverage1.25x
Verdict on statewide numbers: Medical office of this size does not pencil at typical cost and rent; the gap is 3.8% of cost in yield.
The Pennsylvania market
People and jobs
13,059,432 residents in 2025, growing 0.10% a year since 2020. 5,323,029 private jobs in Q1 2026, +0.0% in a year.
Census Population Estimates (Vintage 2025); BLS QCEW private employment.
Rents and vacancy
Median gross rent $1,162 a month; a new build leases at roughly a premium to that. Rental vacancy 4.9%. 1,605,715 renter households with a median income of $46,003.
US Census ACS 5-year 2023, tables B25064, DP04, B25003, B25119.
Permits in 2025
15,812 single-family homes, 1,222 units in 2 to 4 unit buildings, and 8,675 apartment units permitted statewide.
US Census Building Permits Survey, state annual file.
Competing supply
13,178 physician, dental and outpatient offices in Pennsylvania, 101.5 per 100,000 residents.
US Census County Business Patterns 2023.
How medical office building projects get financed
Who lends. Banks and credit unions for physician-owned buildings; CMBS and life companies for multi-tenant; SBA 504 for owner-occupied practices.
Typical stack. Conventional 25% equity; SBA 504 to 90% when the practice occupies 51% or more; CMBS 60 to 65% LTV.
SBA. Eligible when owner-occupied (51%+). A physician group building its own office is the classic 504 borrower.
What a lender will ask for
- Anchor tenant: a health system or the owner practice
- Lease term and tenant credit
- Build-out specification (exam rooms, imaging, plumbing)
- Parking ratio and hospital proximity
- Practice financials for owner-occupied loans
Medical office rarely needs a formal feasibility study; the lease is the study. This screen sizes the rent and the pre-leasing you need.
Assumptions
| Input | Low | Typical | High | Source |
|---|---|---|---|---|
| All-in cost per sq ft | $400 | $480 | $560 | Matthews 2026: delivered MOB $400 to $560 per sq ft; Buildermuse shell $250 to $400 plus TI $100 to $350 (2026) |
| NNN rent per sq ft per year | $25 | $27 | $34 | Revista 3Q 2026 $26.59; CBRE Q1 2026 $25.40; new-build $33.06; Houston $25.34, DFW $24.49 (2026) |
| Stabilized occupancy | 88% | 92% | 95% | Vacancy 7.8% national, 9.2% DFW, 11.7% Houston (2026) (2026) |
| Operating expense share | 8% | 10% | 15% | NNN; landlord retains unrecovered share (2026) · estimate |
| Lease-up or ramp | 6 mo | 12 mo | 24 mo | New MOB pencils only pre-leased to a health system or physician owner (2026) · estimate |
| Exit cap rate | 6% | 7% | 7% | Revista and CBRE: 6.9% Q1 2026; Houston 5.8% (2025) (2026) |
| Permanent loan to value | 60% | 70% | 90% | Banks 75%, SBA 504 to 90% owner-occupied, CMBS 60 to 65% (2026) |
| Permanent rate | 7% | 7% | 8% | CMBS medical office 6.5 to 7.75% (July 2026) (2026) |
| Debt yield floor | 9% | 9% | 10% | Office lenders; tenant credit drives everything (2026) · estimate |
| Construction loan to cost | 55% | 62% | 70% | HVS 2026 survey commentary: lenders requiring larger equity (2026) · estimate |
| Debt service coverage floor | 1.2 | 1.25 | 1.35 | Proprise multifamily underwriting primer (2026) |
Questions
- How much does it cost to build a medical office building in Pennsylvania?
- A 20,000 sq ft medical office building runs $8.0 million to $11 million all-in in 2026, about $480 per sq ft in the typical case: land $1,440,000, hard cost $5,787,234, soft cost $1,446,809, contingency $434,043, interest reserve $260,426, developer fee $231,489.
- How much of it will a lender finance?
- About $4,154,961 (43% of cost), limited by DSCR, at 7.00% over 25 years. The sponsor brings $5,445,039 of equity. Conventional 25% equity; SBA 504 to 90% when the practice occupies 51% or more; CMBS 60 to 65% LTV.
- Does a medical office building pencil in Pennsylvania right now?
- On statewide numbers the typical case does not pencil: yield on cost 4.6% against a target of 8.4% (exit cap 6.9% plus a development spread). Your city, site and rents change the answer; the $299 Capital Projects screen runs it for your address.
This screen is an informational estimate built from published 2025–2026 benchmarks and public datasets for the county you named. It is not an appraisal, a feasibility study, a market study, an offer or commitment of financing, or investment, legal, tax, construction or financial advice. "Stabilized value" and similar figures are formula outputs (net operating income divided by a benchmark capitalization rate), not opinions of market value. Neur LLC is not a licensed appraiser, broker, lender or engineer. Lenders, the SBA and HUD require independent third-party studies and reports before committing capital; obtain them before you buy land, sign a contract or borrow. Figures are estimates with ranges and will differ from actual bids, rents and loan terms. Use of this screen is subject to neur.co/terms.