Rx for Ailing Retail?
Back in late 2009-early 2010, I started seeing an uptick in medical users setting up shop in retail centers. I thought, “This is going to be a trend!” I was convinced we’d be seeing more and more outpatient and urgent care facilities moving in next to the Rite Aids and Ann Taylor Lofts of the world. For some reason, though, this “trend” is not evolving. And, to be honest, that’s a little more than surprising to me; it’s puzzling!
Why hasn’t medical-retail taken off like we thought it would? Why is it that — at a time when there are more and better sites than ever before and plenty of reasons to unite — the medical and retail communities haven’t taken advantage of the obvious synergies?
It seems like the medical community is taking a step back, which I think is a shame, because the retail development community is more interested than ever in having them as tenants. Healthcare seems like a great fit for all the vacancies out there, particularly the newly empty Blockbuster and Hollywood Video locations. Let’s think about it: Most retail locations provide added convenience, accessibility and ample parking for medical patients, and great visibility and branding power for the medical use.
I realize there are plenty of challenges to account for when trying something new, and we all know nothing is ever easy the first time around. There can be issues with zoning and co-tenancy, and when it comes to dealing with a non-retail use, retail landlords and real estate professionals don’t always understand how to structure the build-out so that it’s a win-win for everyone. Also, I know medical spaces require more complex build-outs because of their utilities and mechanical system needs. The single HVAC systems that exist in most retail spaces can be limiting to the medical tenant’s ability to be flexible.
I wonder though, if the true obstacles might be less logistical and more “cultural.” Medical real estate and retail real estate tend to speak different languages. And, medical professionals are used to being near other medical facilities. There is a comfort level with staying true to a formula; a sense of “safety in numbers.” If that’s the case, we aren’t likely to see much movement on this in the near future, especially if we continue to see retailers recovering and backfilling available space.
I think that if this trend is going to gain any momentum, retail landlords will need to meet with the heads of facilities for medical systems and be more proactive in their pursuit. Also, I think retail real estate professionals will need to work on having a better understanding of the needs of medical users in order to improve communication across the board.
What do you think? Were we too quick to think “medical retail” was going to be the next biggest trend? And, if this truly doesn’t pan out, what does that mean for vacant real estate space in the long term?
What do you think? Email me at [email protected].
Jeff Green is president and CEO of Phoenix-based Jeff Green Partners (jeffgreenpartners.com), a leading consulting firm specializing in retail real estate feasibility, retail expansion planning, medical retail planning, location analysis and commercial land use.
Study: Retailers Eye Consumer Behavior as Economy Evolves
With sales experiencing the peaks and valleys of a slowly recovering economy, retailers are watching their customers even closer than ever.
According to a study by accounting and consulting firm BDO USO, LLP, New York City, retailers have been less concerned in 2011 about consumer confidence and spending and, instead, are more watchful of consumer demand and interest.
BDO’s RiskFactor Report for Retail Businesses, which examines the risk factors listed in the most recent SEC 10-K filings of the largest 100 public U.S. retailers, found that consumer confidence and spending dropped from the fifth most cited risk factor in 2010 to the eleventh so far in 2011. Conversely, 87% of retailers are concerned with consumer demand and interest, up from 63% in 2010.
Almost all retailers — 97% — said general economic conditions remain their top risk. However, because of the decline in risks associated with consumer spending, BDO says it’s clear that retailer confidence in the recovery is increasing.
“Retailers are shifting away from the defensive recessionary mode. They are paying more attention to controllable risks, as opposed to external factors like economic conditions,” said Doug Hart, partner in the Retail and Consumer Product Practice. “Consumer balance sheets are stronger, and retailers see a critical opportunity to sharpen inventory and offer a breadth of merchandise.”
Among other report findings, top retailers have reason to be concerned about personnel risks. Amid several executive leadership changes, risks associated with the loss of key personnel saw a notable 49% increase this year. Seventy-three percent of retailers cited it as a concern.
This year has seen a return of mergers, acquisitions and growth plans. The recovery of both consumer spending and corporate bond markets has contributed to a recent spate of retail acquisitions by private equity firms. As a result, risks associated with mergers and acquisitions and joint ventures are back on the rise (62%), up from 47% in 2010. Retailers are also returning to expansion plans with an eye towards updated store formats and concepts. With the renewed focus on expansion, 67% of companies cite risks associated with U.S. growth plans, an 18% increase over 2010.
“While retailers are highly concerned with pricing pressures, they are also looking to expand,” said Hart. “Gradual increases in consumer spending, favorable rents and stronger balance sheets have retailers looking for growth opportunities.”
Walgreens plans major expansion in Chicago
Deerfield, Ill. — Walgreens is expanding its presence in Chicago, and adding 600 new jobs in the process. Under its new "Chicago Hometown Investment Initiative," the drugstore chain plan to expand its downtown office space, add new stores and remodel up to 142 existing units.
“Walgreens is proud of our historic roots in Chicago and pleased to take our presence in the city to a new level by bringing more jobs and contributing to the prosperity and quality of life here," said Walgreens president and CEO Greg Wasson. "We already employ more than 4,500 people in the city, and the additional jobs we plan to bring here will position us to serve community needs in new and better ways.”
Walgreens’ "Chicago Hometown Investment Initiative" includes three key components:
- Expanded downtown office space: Walgreens will expand its downtown presence for e-commerce, information technology and other support areas. The retailer estimates the move will bring approximately 300 jobs to downtown Chicago.
- New and remodeled drugstores: Walgreens plans to open at least five additional stores in Chicago during the next two years, while also investing in remodeling many of its existing stores in the city. The new and remodeled stores, combined with expansion of Walgreens food oasis locations, are expected to add approximately 300 new jobs in the city.
- Walgreens intends to quadruple the number of Chicago stores in which it provides expanded healthy food selections to serve communities identified as food deserts, or areas that lack access to basic foods necessary to maintain a healthy diet. In August 2010, Walgreens celebrated the opening of 10 redesigned stores on Chicago’s South and West Sides to include more than 750 new food items, including fresh fruits and vegetables, frozen meats and fish, pasta, rice, beans, eggs, whole grain cereals and other healthy meal components. The company now plans to double the number of stores with expanded healthy food selections by 2012, and double the number again in 2013, to reach a total of nearly 50 food oasis stores.