REAL ESTATE

5Qs for Steven and Patrick Wathen on healthcare in retail centers

BY Al Urbanski

A recent conversation with Steven and Patrick Wathen of Equity/ECS — a Columbus, Ohio-based real firm that works retail projects from development to construction to leasing — found the company dealing more than ever with healthcare tenants. We asked them about what their increased presence at retail means to shopping centers.

When and how did healthcare evolve into a retail use?
STEVE: The emergence of healthcare as a retail use has been driven by the consumer and has emerged as the growth industry of the next 25 years. Healthcare providers began to seek locations that provided access, signage, and visibility to the end-user as a method of capturing market share. This trend in healthcare, which would certainly be considered an old-school approach for retailers, dates back 15 or so years ago.

What are some emerging healthcare segments?
PATRICK: Going back 10 years or so, urgent care centers really ramped up growth and were on the leading edge. This was similar to the high-visibility retail that an Aspen Dental would seek out — endcaps, outparcels, etcetera. There are many reasons healthcare users are attracted to shopping centers. One chief one is they can enjoy the positives of a retail location at costs similar to class A medical office space. While urgent care growth has slowed, other practice types are going strong. We have healthcare groups seeking retail space in dermatology, physical therapy, dental, ophthalmology, and behavioral. We also see veterinary services moving into retail settings.

What do healthcare tenants bring to a center?
STEVE: Healthcare tenants are great additions to shopping centers because they bring long-term leases, stable tenancy that is e-commerce resistant, and off-peak parking usage. They also invest more heavily in their spaces than most retailers — often in excess of $150 per square foot above a white box.

Traditional tenants often complain about parking issues when healthcare tenants arrive. Are there other issues and how do you deal with them?
PATRICK: Early on, parking was one of the primary objections or concerns, but we’ve found over time that, depending on the practice, this is a non-issue and can actually be a positive. For instance, looking at a typical lineup of fast-casual restaurants and coffee shops, a healthcare tenant is less intense and actually may have fewer visits at meal times when those users bury the parking lot. Other concerns such as medical waste, hours of operation, use restrictions, and exclusivity are solved by gaining familiarity with the practice type and use.

How do retailers in these centers capitalize on the presence of a healthcare tenant?
PATRICK: There are many uses that are synergistic, such as fitness, massage spa concepts. The key is where they are placed and how that fits into the overall merchandise mix. Retailers benefit due to increased foot traffic and some additional daytime population, as healthcare will typically have more staff on site than a retailer of similar square footage.

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