Since the 1990s, developers of mixed-use and single-use urban infill sites have discovered that retail formats can be important components or outright drivers of development proposals. This phenomenon is attributable to underlying determinants of demand supported by the income density of urban census tracts. It is also influenced by decades of disinvestment that failed to respond in a timely fashion to corrective measures which reduced the virulence of locational disincentives. In inner-city markets, those risk mitigating factors include lowering crime rates and the attraction of Generation X and Generation Y populations to central-city neighborhoods. When opportunities arise to re-balance the disparities of the supply of retail space in urban markets, some pioneering retailers have experimented with limited adaptations of formats to address the constraints inherent in urban infill sites—classic examples being the Harlem Pathmark project in East Harlem and Target’s forays into Brooklyn and Washington, DC. Some experiments by retailers have been successful; others were less so.
Developers and planners should now ask whether urban healthcare facilities may offer similar opportunities for the commercial components of projects. A transformation of the healthcare delivery system is occurring as the nation moves from a reduction of large-scale hospital facilities to the development of smaller facilities such as freestanding emergency departments, ambulatory surgery centers, urgent care clinics and community health centers. At a panel presentation last year to The Wharton Club of New York, Dr. Ezekial Emanuel, a prominent authority on the Affordable Care Act, suggested occupancy levels of the U.S. hospital industry, combined with modern healthcare economics, both were precipitating an inevitable reduction in the nation’s required stock of hospital beds. Dr. Emanuel also mentioned that the average occupancy rate of the nation’s 5,000 hospitals was about 70%—not a robust indicator of fiscal health when compared to the similar metric for the hotel industry. Now, occasionally a few major metropolitan areas may see the development of large-scale facilities such as state-of-the-art proton therapy centers for the treatment of cancer. However, just as national retailers such as Walmart, Best Buy and Staples have been gravitating towards smaller formats, the healthcare industry has increasingly been embracing smaller facilities as part of new delivery models geared towards outpatient care at the expense of inpatient hospital treatment. Therefore, developers of urban retail and mixed-use projects should be mindful of whether the capital expenditure and facility development plans of healthcare operators should be considered in programming the development of infill sites.
Developers and planners should now ask whether urban healthcare facilities may offer similar opportunities for the commercial components of projects. A transformation of the healthcare delivery system is occurring as the nation moves from a reduction of large-scale hospital facilities to the development of smaller facilities such as freestanding emergency departments, ambulatory surgery centers, urgent care clinics and community health centers. At a panel presentation last year to The Wharton Club of New York, Dr. Ezekial Emanuel, a prominent authority on the Affordable Care Act, suggested occupancy levels of the U.S. hospital industry, combined with modern healthcare economics, both were precipitating an inevitable reduction in the nation’s required stock of hospital beds. Dr. Emanuel also mentioned that the average occupancy rate of the nation’s 5,000 hospitals was about 70%—not a robust indicator of fiscal health when compared to the similar metric for the hotel industry. Now, occasionally a few major metropolitan areas may see the development of large-scale facilities such as state-of-the-art proton therapy centers for the treatment of cancer. However, just as national retailers such as Walmart, Best Buy and Staples have been gravitating towards smaller formats, the healthcare industry has increasingly been embracing smaller facilities as part of new delivery models geared towards outpatient care at the expense of inpatient hospital treatment. Therefore, developers of urban retail and mixed-use projects should be mindful of whether the capital expenditure and facility development plans of healthcare operators should be considered in programming the development of infill sites.
Wellness center in low-traffic location of City Heights Retail Village
There are additional considerations. First, healthcare has a quasi-retail character that, in certain respects, is more analogous to retail than to conventional office space. Similar to retail, healthcare facilities such as ambulatory care operations and urgent care clinics exist to serve a population visiting the establishment to obtain a product, i.e., healthcare services. That traffic-generation aspect of certain healthcare operations can have synergies with retail outlets such as drug stores, coffee shops and other food service operations. (It is interesting that Walmart, along with drug store titans CVS and Walgreens, are incorporating clinics into some of their stores.) Second, the size of the healthcare sector alone warrants attention from the development community inasmuch it comprises nearly 18% of the gross domestic product of the United States and 1.7 trillion dollars in annual revenues. Compare that to the U.S. restaurant industry’s annual revenues of 660 billion dollars. Third, as a commercial use, healthcare operations can offer developers design flexibility that retail often can’t. For example, whereas retail typically will not work on a second or third level of a mixed-use project (department stores and urban mall developments excluded), healthcare operations can occupy second-story space or, alternatively, operate in site footprints and in spatial configurations that are spread out over multiple levels. This last point should be noted by economic development professionals as this may also mean that healthcare facilities can offer more job generation per square foot of site area than horizontal retail layouts and, potentially, at higher wage rates than those typically paid by conventional retailers such as restaurants. In NYC, the average pay of healthcare industry workers is $56,000 annually—a metric obviously influenced by physician and nursing salaries, but nonetheless reflective of the career opportunities of lower-level jobs such as patient care technicians, clinical medical assistants and health information technicians.
So, is healthcare the new retail? Maybe, maybe not. But it does offer new opportunities to incorporate commercial uses amidst retail storefronts or as a substitute for locations where it may be difficult to attract retailers. -- Lamont Blackstone
So, is healthcare the new retail? Maybe, maybe not. But it does offer new opportunities to incorporate commercial uses amidst retail storefronts or as a substitute for locations where it may be difficult to attract retailers. -- Lamont Blackstone
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