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 jgreen@jeffgreenpartners.com.

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.