Ambulatory Surgery Centers (ASCs) have become one of the most dynamic segments within healthcare real estate. These outpatient facilities provide surgical procedures that do not require overnight stays, and their role in the healthcare delivery model continues to expand.

Procedures that were once performed almost exclusively in hospitals — including total joint replacements and certain cardiac device implantations — are increasingly shifting to ASCs. The migration is largely driven by lower costs for patients and insurers, improved technology, and greater operating efficiencies. As payors continue to prioritize cost containment and value-based care, ASCs are positioned for sustained long-term growth.

For real estate investors, this shift presents opportunity, but also complexity. Valuing an ASC requires a deeper understanding of operational risk, lease structure, and financial performance compared to traditional medical outpatient buildings (MOBs).

The First Step in ASC Valuation

The first step in valuing an ambulatory surgery center is identifying the type of facility. There are several different types of surgery centers, but they typically fall under two general categories:

Ownership structure is equally important. Many high-performing ASCs operate as joint ventures between physicians, health systems, and national ASC operators. Institutional alignment often strengthens governance, enhances referral pipelines, and improves operational discipline. From an investment perspective, centers with diversified physician participation and health system affiliation generally command stronger pricing than independently operated, single-physician practice facilities.

Ultimately, understanding who controls the operation and how diversified the revenue base is sets the foundation for valuation.

The Importance of EBITDAR Coverage in ASC Valuation

As with any mission-critical healthcare real estate asset, a crucial factor in the pricing of ASCs is the EBITDAR (Earnings Before Interest, Taxes, Depreciation, Amortization, and Facility Rent) coverage ratio. This ratio ensures that the operator can afford their rent and continue operating.

This ratio reflects a tenant’s ability to meet its lease payments while maintaining operational stability. Investors typically look for coverage of 2.0x or greater for surgery centers. Stronger coverage ratios reduce risk, support long-term lease sustainability, and often justify lower cap rates.

ASC Lease Structures: Build-to-Suit vs. Tenant Improvement Model

The next step is understanding the rental rate and how it is calculated. Many surgery centers are free-standing, build-to-suit assets that are delivered turnkey to the tenant, typically under long-term net leases. These projects are often priced on a rent yield basis, meaning total construction costs are multiplied by a yield factor that is slightly above the anticipated capitalization rate. The spread between the yield and the cap rate represents the developer’s profit.

As construction costs have increased in recent years, rents have followed. Pre-pandemic ASC rents often ranged from $30 to $40 per square foot; today, $50 to $60 per square foot or more is common in many markets.

An alternative structure involves the landlord delivering shell space with a standard tenant improvement package, while the tenant funds the specialized surgical buildout. These tenant-funded costs can sometimes exceed $500 per square foot. For health systems or large operators with lower costs of capital, this approach can reduce base rent and improve coverage ratios. From a landlord’s perspective, tenant-funded improvements increase renewal probability, as relocation costs become prohibitive.

From an investment standpoint, the latter of these two scenarios, with the tenant investing significantly into the space, is the more ideal scenario. Not to say the build-to-suit scenario is unfavorable, but the tenant making a significant investment in the space demonstrates their commitment to the space. This creates a higher EBITDAR coverage ratio given the lower rent, and the long-term renewal prospects are higher given that alternative locations may require significantly higher rent or large capital outlays by the tenant.

Final Consideration: Capitalization Rate Estimate

After evaluating operational structure, rent, lease terms, and financial performance, capitalization rate analysis completes the valuation framework.

A review of 56 transactions in our database over the last two years indicates a capitalization rate range from 5.56% to 7.91%, with an average of 6.57%.

While it may be tempting to apply the average across all assets, stronger operations — those with health system or major operator alignment, long-term leases, solid EBITDAR coverage, and sustainable rent levels — typically command the lower end of the capitalization rate range. Assets lacking one or more of these characteristics typically begin to be penalized from a capitalization rate basis for each lacking characteristic.

Compared to traditional medical outpatient buildings, surgery centers have historically carried slightly higher cap rates. However, that spread has narrowed in recent years as investors increasingly recognize the long-term economics and growth trends within the ASC sector. There have been multiple funds and capital focused specifically on these assets.

That said, specialized healthcare properties — including surgery centers, imaging centers, hospitals, and cancer centers — often trade at modestly higher cap rates due to their operational complexity and re-leasing considerations.

Key Risks and Competitive Advantages

The specialized nature of ASCs has its benefits, namely, a lack of cost-effective alternative options in a marketplace where a tenant could move. On the other side, if the tenant were to vacate, the pool of potential users available to re-tenant the space is smaller than standard clinical space in the market, and that risk should be considered.

The surgery center market continues to be a desirable investment subsector in the healthcare real estate market. Investing in and valuing these specialized assets requires careful consideration of the type of operational makeup, rent levels, financial performance, and broader economic trends. Investors who account for these unique variables are better positioned to succeed in this complex market.