2020 Outlook: Medical is Still a Solid Bet for Retail Owners and Investors
December 4, 2019
In 2020, market savvy healthcare providers will continue their migration away from traditional medical campuses to retail centers and malls. The continuation of this trend is good news for commercial real estate owners and investors struggling with the brick and mortar retail bust.
Benefits for Retail Owners
- Increased foot traffic: The number of year-round healthcare-related services and purchases continues to grow as the U.S. population ages.
- Less risk: Healthcare providers tend to have higher credit ratings and are less likely to default.
- Longer leases: Medical leases are typically double the term of normal retail leases.
Benefits for Consumers
- Convenience: Locations with access to other amenities mean that routine medical services and purchases can be done while accomplishing other tasks/errands.
- Availability: Retail locations have extended hours (nights and weekends) compared to traditional doctors’ offices and medical facilities. Since the first retail health clinic opened in 2000, 44 percent of patient visits have taken place when physician offices are typically closed, according to RAND Corporation.
- Comfort: From drop-in clinics to virtual visits, healthcare has become more focused on the consumer experience.
“There is not only plenty of room for growth for retail center owners, but ample opportunity for providers to meet the demands of a motivated patient population.
Examples of the “retailization” of healthcare
- Atlanta, GA: Emory Healthcare is leasing 224,000 square feet of what used to be a Sears store and other sections of Northlake Mall, where the healthcare provider plans to centralize more than 1,600 employees. The mall’s “central location combined with easy highway and MARTA bus access,” coupled with plentiful parking and onsite restaurants and retail helped persuade Emory Healthcare to make a deal, Mike Mason, Emory Healthcare vice president of operations, said in a press release.
- Foxborough, MA: In 2018, Dana-Farber Cancer Institute announced it has signed an agreement to lease approximately 34,000 square feet of medical office space at Patriot Place, an open-air shopping center. “[This] furthers our commitment to providing local communities with access to world-class health care closer to home,” said Brian Earley, Patriot Place general manager.
- Minneapolis, MN: In early 2019, Minneapolis-based Fairview Health Services announced plans to open a walk-in clinic at the Mall of America. “We’re working to make the best health care as convenient and accessible as possible for people,” Laura Reed, chief operating officer at Fairview, said in a news release. “This new clinic brings high-quality healthcare much closer to people whether they are shopping, traveling, or working at or near the Mall of America.”
Key Takeaway: Commercial real estate developers and owners should study the successes of other retail-to-healthcare projects and apply them to their properties. These trends present opportunities to transform struggling or bargain-priced locations into stable projects with long-term viability. To learn more about retail-to-medical conversions, contact Grant Gooding: 770-353-5329 or [email protected]
Go where the growth is.
“As the healthcare industry evolves to a value-based model, costly inpatient acute care is migrating to less expensive off-campus outpatient care facilities. Amid this shift, the number of healthcare retail clinics has grown by 47 percent in the last three years, and yet only 10 percent of U.S. shopping centers have a healthcare-related tenant,” wrote Chad Pinnell, managing director of healthcare solutions at JLL, in a recent article in Medical Construction & Design magazine. “That means there is not only plenty of room for growth for retail center owners, but ample opportunity for providers to meet the demands of a motivated patient population.”
According to the U.S. Centers for Medicare & Medicaid Services (CMS), health spending is projected to grow 0.8 percentage point faster than Gross Domestic Product (GDP) every year through 2027 period. The health share of GDP is expected to rise from 17.9 percent in 2017 to 19.4 percent by 2027.
Personal healthcare spending increases more than five-fold over a typical lifetime. As the Baby Boomer tsunami continues to roll into retirement, that translates to big increases in health spending on delivery of care (hospitals, physicians and clinics, nursing homes, etc.) and for medical products (prescription drugs, over-the-counter medicines, and for durable medical products such as eyeglasses and hearing aids) purchased in retail outlets, according to CMS.
The “retailization” of healthcare is fueling a revitalization of malls and retail centers gone dormant as consumers move online. But some things you can’t get online: diagnostic imaging, outpatient disease management, flu shots and hearing-aid fittings, to name a few.
Mall and retail spaces offer a ready opportunity to plug into convenient locations, ample parking and adjacent complementary amenities.
“Previously, medical tenants were located in stand-alone buildings that limited accessibility and convenience. Not only did this keep healthcare at arm’s length for many people, but it fostered the stigma that a healthcare experience was an isolated, disconnected event. Fortunately, this stigma is dissolving as the industry and its design partners reimagine the spaces that can deliver care,” writes Tama Duffy Day and Randy Guillot, Health & Wellness Leaders at the global architecture firm Gensler.
“Developers are also taking note. Now, people in cities can find health and wellness in all kinds of creative spaces, from one-room clinics in mixed-use buildings to small community centers.”
For questions or to learn more about retail-to-medical conversions, contact Grant Gooding: 770-353-5329 or [email protected]