In my February 18th article for this blog, I posed the question of whether healthcare facilities are the new retail. A recent panel discussion sponsored by the International Council of Shopping Centers (ICSC) provided a resounding affirmative—at least for suburban shopping center operators. That program was hosted in Chicago by the trade association for the retail real estate industry, and it included professionals from both healthcare companies and commercial real estate organizations. Healthcare operators on the panel represented commercial space users with requirements ranging from as little as 1,500 sq. ft. to up to 100,000 sq. ft. of gross leasable area.
The discussion was anchored by several premises shared by the panelists. First, the mission of the nation’s healthcare system is changing from a focus on responding to episodic illness events to a continuous focus on wellness and “preventive maintenance” for optimal health. Second, and related to this, is a process of decentralization of the healthcare system, a shift which has as its imperative the placing of healthcare facilities closer to “consumers,” the new terminology for “patients.” It is this motive that has unleashed a development thrust evidenced by the construction of ambulatory facilities such as clinics, surgery centers, urgent care centers and freestanding emergency departments. And these various forms of outpatient facilities are finding their way onto outparcels and into retrofitted junior anchor spaces in open-air shopping centers and malls. However, larger healthcare facilities within retail settings can encompass 100,000 sq. ft. and more. As a striking example of a regional mall location, I am aware that Vanderbilt Health, a healthcare network affiliated with Vanderbilt University, signed a lease deal for approximately half of the 850,000 sq. ft. at One Hundred Oaks Mall in Nashville, TN. I had visited that mall several years ago and witnessed how it struggled for an identity and viable tenant mix in the metropolitan area.
The discussion was anchored by several premises shared by the panelists. First, the mission of the nation’s healthcare system is changing from a focus on responding to episodic illness events to a continuous focus on wellness and “preventive maintenance” for optimal health. Second, and related to this, is a process of decentralization of the healthcare system, a shift which has as its imperative the placing of healthcare facilities closer to “consumers,” the new terminology for “patients.” It is this motive that has unleashed a development thrust evidenced by the construction of ambulatory facilities such as clinics, surgery centers, urgent care centers and freestanding emergency departments. And these various forms of outpatient facilities are finding their way onto outparcels and into retrofitted junior anchor spaces in open-air shopping centers and malls. However, larger healthcare facilities within retail settings can encompass 100,000 sq. ft. and more. As a striking example of a regional mall location, I am aware that Vanderbilt Health, a healthcare network affiliated with Vanderbilt University, signed a lease deal for approximately half of the 850,000 sq. ft. at One Hundred Oaks Mall in Nashville, TN. I had visited that mall several years ago and witnessed how it struggled for an identity and viable tenant mix in the metropolitan area.
Because medical megatrends are compelling healthcare organizations to think of patients as consumers and customers, healthcare companies are adopting the same type of consumer-centric thinking that has guided retailers and retail site selection decisions. This is superbly illustrated by The Little Clinic, one of the panel participants at the ICSC event. That company was founded on a business model of locating professionally-staffed healthcare clinics in retail stores, thereby providing both convenience and affordability to individuals juggling demands of work and family. Such facilities also addressed a need for a complement to primary care physicians after normal office hours or on weekends. In 2010, the company was purchased by The Kroger Co., one of the largest supermarket chains in the nation, and it has implemented a strategy of tapping the operational and marketing synergies of co-location with a grocery anchor. The Little Clinic now operates 175 facilities in supermarkets located in the Midwest and the Southeast.
Given the healthcare industry’s new focus on wellness, leveraging the nutritional guidance and support available in supermarket aisles and perishables departments is just one example of the symbiotic relationship between healthcare and retailing in the new healthcare paradigm. I have now worked on three urban mixed-use development proposals that incorporate both supermarkets and health clinics in co-location situations, and I expect urban markets will see more examples in the future. I also note that the co-locating of supermarkets and healthcare facilities pairs two recession-resistant commercial tenancies. In addition, healthcare organizations have a growing customer base attributable to an aging population and increases in the percentage of insured households. As such, the LIVE-SHOP-HEAL paradigm should continue to replicate. – Lamont Blackstone, CRX
Given the healthcare industry’s new focus on wellness, leveraging the nutritional guidance and support available in supermarket aisles and perishables departments is just one example of the symbiotic relationship between healthcare and retailing in the new healthcare paradigm. I have now worked on three urban mixed-use development proposals that incorporate both supermarkets and health clinics in co-location situations, and I expect urban markets will see more examples in the future. I also note that the co-locating of supermarkets and healthcare facilities pairs two recession-resistant commercial tenancies. In addition, healthcare organizations have a growing customer base attributable to an aging population and increases in the percentage of insured households. As such, the LIVE-SHOP-HEAL paradigm should continue to replicate. – Lamont Blackstone, CRX
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