PMB Breaks Ground on $275 Million University of Kentucky Medical Office Building in Lexington

PMB LLC and UK HealthCare held a ceremonial groundbreaking Oct. 21 for a 220,000-square-foot medical office building on the University of Kentucky's Hamburg East site in Lexington, Kentucky. The building, estimated to cost approximately $275 million, is the first phase of a multiphase development on Cowgill Way, off Winchester Road. Substantial completion is planned for December 2028, and first patient visits are targeted for spring 2029.

City and state officials joined University of Kentucky and UK HealthCare leaders at the ceremony to mark the start of construction. The project is part of UK HealthCare's strategy to expand outpatient access, with clinics now in Frankfort, one opening next month in Richmond and another coming soon at Newtown Pike in Lexington.

Project Details: Hamburg East Medical Office Building

The Hamburg East Medical Office Building sits near the intersection of I-75 and Winchester Road (US-60). The first phase includes the medical office building, landscaped green space, an arrival plaza and parking. The development team includes PMB LLC, Walsh Construction and Perkins&Will.

The facility will pair academic medical center specialty care with a community setting. Planned services include:

• Adult and pediatric primary care and urgent care
• Multidisciplinary musculoskeletal care, with orthopaedics, physical medicine and rehabilitation, and interventional pain housed together
• Women's health; ear, nose and throat; ophthalmology; dermatology; cardiology; neurology; and rheumatology
• Expanded nononcology infusion, imaging and laboratory services
• A full-service drive-thru retail pharmacy

"This area in and around Hamburg has the largest concentration of UK employees in the county and allows us to create easier access to care close to where employees and their families live," said Eric N. Monday, executive vice president for finance and administration and co-executive vice president for health affairs. He added that the site also provides convenient access for Eastern Kentucky patients traveling to Lexington for care.

Public-Private Partnership Structure With PMB

The project is a public-private partnership between the University of Kentucky and PMB, a healthcare real estate development company that works with health systems, hospitals, medical groups, specialty providers and academic medical centers. PMB will plan, design, construct, finance, operate and maintain the building, allowing UK HealthCare to remain focused on patient care, education and research.

UK will retain ownership of the land and lease the project site to PMB for an initial term of 65 years, with potential extensions. PMB will then lease the facility to UK under a 15-year lease with two- or 10-year renewal options. UK will oversee key design standards and clinical operations to align with its quality, operational and mission-driven requirements.

"Being part of UK HealthCare's mission of Advancing Kentucky has been an incredibly rewarding experience," said PMB President and Managing Partner Jake Rohe. "The partnership clicked from day one, is built on strong relationships and trust and created a unique and powerful project team culture."

The University of Kentucky Board of Trustees approved the acquisition of about 41 acres in the Hamburg area, at the corner of I-75 and Winchester Road, in 2023. Cowgill Inc., the original landowner and developer, began site preparation in February 2024 and completed it earlier in 2026. "This project is about more than a new medical office building; it is about investing in the future of and creating a place that will serve this community for generations," said Norwood "Buddy" Cowgill Jr., president and CEO of Cowgill Inc.

Outpatient Demand Drives UK HealthCare Expansion

UK HealthCare reports outpatient visits exceeding three million annually, about two million of which occur in its ambulatory clinics. The Hamburg East facility is projected to support approximately 300,000 outpatient visits annually by 2034, equal to roughly 15% of the system's current ambulatory clinic volume.

"Hamburg East represents the future of ambulatory care at UK HealthCare," said Ambulatory Chief Medical Officer Kristen Stakelin, M.D. "By thoughtfully bringing together primary care, advanced subspecialty services, imaging, laboratory services, therapy and pharmacy services, we are creating a more seamless experience for patients and families."

Lexington Mayor Linda Gorton said the expansion would better serve residents of the city and the region. State officials also attended: Kentucky House Speaker Pro Tem David Meade called the project an example of state government, the university, local leaders and private partners working together, and State Senator Amanda Mays Bledsoe said it would bring UK HealthCare's expertise closer to the families who depend on it.

Medical Office Market Context

The project arrives as medical office fundamentals remain firm. Institutional-grade medical office vacancy averaged 5.5% in the second quarter of 2026, compared with 13.4% for conventional office, according to DWS. Medical outpatient transaction volume rose nearly 60% year over year to $2.9 billion in the quarter, and average medical office capitalization rates were approximately 7.1%.

CBRE reported an overall medical outpatient building vacancy rate of 9.8% at midyear 2026, forecast to finish the year at 9.7% as limited new supply and positive absorption support the sector. Cresa reported average healthcare property occupancy above 90%, with rising rents and constrained new construction because of elevated costs and financing challenges.

At approximately $275 million for 220,000 square feet, the announced development cost equates to about $1,250 per square foot. One 2026 market outlook placed average existing medical office pricing around $310 per square foot and national new construction costs at $400 to $560 per square foot. The Hamburg East figure likely reflects the project's academic-medical-center specification, broad specialty mix, site work and parking, and should not be compared directly with stabilized building acquisition prices.

Outlook

With the University of Kentucky retaining the land and PMB responsible for development, financing and operations, the Hamburg East project advances UK HealthCare's outpatient strategy while keeping the health system's focus on clinical care. Construction is scheduled to reach substantial completion in December 2028, and first patient visits are targeted for spring 2029.

Sources

• PMB LLC: PMB Breaks Ground on UK HealthCare Hamburg East MOB – 220K SF