Experts Say Medical Tenants To Become Even More Prevalent At Shopping Centers
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As struggles in the retail sector persist, landlords are looking even more heavily at medical centers. Bisnow sat down with CBRE Americas head of retail owner/agency practices Todd Caruso (below, left) and CSG co-chair of real estate, development and land use Mitchell Berkey (below, right) to discuss the growing presence of medical facilities at retail centers.
Bisnow: Why do we see an uptick in medical facilities taking space in retail centers?
Mitch: There are three major forces at work regarding the growth in urgent care centers in what were traditionally retail properties. One is that Americans are spending an increasing amount on healthcare; two, Americans want healthcare that is easily accessible, faster and less expensive than the traditional emergency room experience; and three, in the real estate world there has been a shrinking in the number of creditworthy tenants over the years. The urgent care center sector has grown substantially, and these establishments generally seek accessible and safe locations with parking, and tend to have strong balance sheets.
Todd: We have an aging demographic that has an enormous appetite for health-related services. One of the driving factors is the overall cost of having someone in a hospital for an extended period of time. Many surgeries are being done through outpatient these days.
Bisnow: What benefits are landlords seeing with these tenants?
Todd: It really depends on the market and merchandise mix of the retail shopping center. Investors and owners have been very positive for reasons you might guess—creditworthiness. In general, many of the expanding hospital systems have robust balance sheets. When combined with extended lease terms, it makes for an attractive tenancy. Owners consequently have less attrition in their retail space, and lower overall expenses associated with having to “build out” due to turnover.
Mitch: From the landlord’s side, urgent care operators are attractive because they are strong financially, invest in their space and generate traffic to the center. Their staying power and stability adds certainty to a landlord’s tenant roster and the seven-days-a-week operations drive shoppers to other retail tenants. This new breed of retail tenant is here to stay as landlords seek to reposition centers which have suffered due to the impacts of e-commerce and retailer consolidation.
Bisnow: How has the changing healthcare landscape affected this trend?
Todd: If we’re thinking about growth industries in the US, certainly healthcare would be one of those. Think about the potential for all of the medical-related companies that have been developed over the past several years—from the financial end to outpatient services like dialysis centers, MRI facilities, surgery centers, dental and ortho, chemo centers, urgent care centers, etc.
Mitch: Take urgent care centers, for example. There are over 7,100 urgent care centers now in the US and the typical urgent care center experience includes seeing a healthcare provider in 30 minutes or less and being in and out in 60 minutes or less. Compare that to the typical emergency room visit, and you can see right there why they have become so popular. There is tremendous growth in this field.