Montecito Pays A Premium For Fully Leased Gilbert Medical Office Building
A medical office building in Gilbert changed hands for just over $32M, one of the largest commercial real estate transactions in Arizona this past month.
Montecito Medical Real Estate purchased the OrthoArizona building at 1675 E. Melrose St. from Sphere Investments, according to Newmark, which brokered the deal. The nearly 50K SF building is 100% leased to OrthoArizona, an orthopedic medical group.
The sale price of $32.3M made it the fifth-largest commercial real estate deal of March, according to AZ Big Media.
The property was last sold in 2021 for $23.6M, when OrthoArizona dealt the property to Sphere, which was then known as Flagler Investments, according to Commercial Property Executive. The seller rebranded in 2024.
The East Melrose Street property first opened in spring 2019, CPE reported. It is near the Mercy Gilbert Medical Center.
Justin Shepherd, Newmark vice chairman and co-head of healthcare capital markets, led the group arranging the sale. He said the increased sale price for the space stems from investors valuing the MOB space.
“It's certainly reflective of an approach from LP investors focusing on necessary real estate, the assets that society needs in terms of its functionality,” Shepherd said.
Investors also know how difficult it can be to affordably build new space to fit the specialized requirements of MOBs, and that can also drive up the sale price, he said.
“At the end of the day, building some ‘sticks’ as it relates to a couple of bedrooms, there’s a little bit of a different dynamic as opposed to the venting and codes you need to build high-powered ORs,” Shepherd said.
The U.S. MOB pipeline is shrinking, and deliveries of new space are expected to drop by 26% this year, according to a January CBRE report.
Nashville-based Montecito Medical has a $6.5B portfolio of MOBs across 40 states, according to the company’s website. In 2026 so far, the private firm has announced acquisitions of some 574K SF of MOB space in seven states, not including this recent sale.
The last MOB Montecito purchased in Arizona was a 29K SF property in Avondale leased to two specialty providers.
Miami-based Sphere has a real estate portfolio of more than 45 properties in the U.S. and France, and it has offices in the U.S., France and Spain.
