Health care tenants a perfect fit for some retail centers
Health care operators provide a rich pool of potential tenants for shopping centers. But only properties that offer visibility, traffic access and branding opportunities will reap the rewards of the impending expansion of the U.S. health care industry, which is being driven by the Affordable Care Act, hospital decentralization and improved technology, said participants in an SCTLive web seminar on Thursday titled “Health Care Tenants Heal Troubled Centers.”
“Health care systems are looking for access to new patient bases, and they want to locate in the areas where people gather,” said Bob Gilbert, president of Columbia, Md.–based MedStar Ambulatory Services. Gilbert emphasized that firms such as his are not necessarily seeking to open shop in areas populated heavily with baby boomers and older consumers, but rather to locate to where they can draw new, well-insured younger customers. Medical tenants that require spaces measuring between 4,000 and 6,000 square feet are expanding most right now, according to Gilbert. Medical tenants usually seek four or five parking spots per 1,000 square feet of operating space, he said. They are also looking for cheaper locations, he said, though not necessarily ones with high vacancies. “We tend to look at retail centers that are being repurposed,” said Gilbert. “We’re still price-sensitive, because our prices are fixed for 90 percent of our patients.”
When trying to lure a health care tenant to a retail center, a leasing agent should learn to translate real estate jargon into health care jargon, advises Chad Pinnell, senior vice president of Columbus, Ohio–based Equity Inc., which advises hospitals and medical practices on their real estate needs. For example, demographics are less important to medical tenants than “payer mix” — which refers to the way patients pay for medical needs: by HMO, say, or through Medicare or Medicaid.
Health care tenants benefit landlords through long-term leases and relatively good credit, observed Robert Nadler, central regional president at Kimco Realty. Many regional dental clinics, dialysis centers and chiropractor offices are currently operating, Nadler said, and over time they will consolidate into national chains, making it easier for leasing agents to find tenants.
Appropriate retail co-tenancies are also crucial for attracting successful medical tenants, Pinnell said. Locating a health care clinic in the same retail center with a sporting-goods store and a vitamin store would encourage more cross-shopping, because consumers needing health care for sports-related injuries have a propensity to shop for sports equipment and nutritional supplements, Pinnell said. And anchors are less likely to take a dim view of co-existing with a health care center these days, now that they have seen the benefits of operating near health clubs, Nadler said.
As for the bumpy rollout of the Affordable Care Act and the way it could affect health care tenants’ expansion plans and credit, panelists advised shopping centers against taking a wait-and-see approach. “Act now,” Nadler insisted. “Expenses are only going to get higher for these operators.” The U.S. health care sector is projected to hit some $5 trillion in sales by 2025, and becoming a trustworthy partner to some of these operators now could pay off handsomely in the future, said Clay Marsh, M.D., a senior associate vice president for health sciences research at Ohio State Medical Center, in Columbus. “We have a good crystal ball for the growth of the health care industry,” he said. “It’s not like retail.”