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February 23, 2022

The rise of 'medtail': Why health care providers are moving into retail spaces

Daily Briefing

    Instead of hospitals or medical office buildings, more health care providers are now branching out into retail spaces, such as shopping centers and malls, to provide patients with more convenient access to care, Jane Margolies writes for the New York Times.

    Retail and urgent care clinic strategy

    The increasing popularity of 'medtail' spaces

    In recent years, health care providers have increasingly moved into retail spaces, a trend known as "medtail," Margolies writes.

    In particular, the growth of urgent care centers as well as walk-in clinics in pharmacy and supermarket chains over the past two decades has helped normalize the idea of seeking medical care in retail areas. For example, CVS began opening clinics in its stores in 2005 and now has more than 1,100 nationwide.

    In addition, a survey from ICSC, a trade group, found that almost seven out of 10 U.S. adults visited health care providers in shopping centers, enclosed malls, or strip malls by 2020.

    According to data from CoStar Group, the proportion of leased medical space in retail buildings has grown from 16% in 2010 to 20% today—and it is expected to continue to grow as landlords seek to fill vacancies and generate foot traffic in retail spaces affected by the pandemic.

    "The retailization of health care has really exploded," said Barrie Scardina, a retail expert for Cushman and Wakefield.

    Now, a range of health care providers, including dentists, physical therapists, and even university medical systems, are seeking retail real estate, such as street-level storefronts or vacated department stores.

    For example, the University of Rochester is creating a $227 million, 350,000 square-foot ambulatory orthopedic facility at The Marketplace Mall in Henrietta, N.Y. The space will include an outpatient surgery center, as well as an area for physical therapy.

    In addition, One Medical, a membership-based primary care chain, has been expanding into outdoor shopping centers, setting up near clothing and home goods outlets, among other stores. "Landlords are becoming understanding about what tenants we want to be next to," said James Goldberg, One Medical's VP of real estate and development.

    The benefits of health care providers in retail areas

    According to Margolies, "medtail" spaces offer more convenient access to medical care, particularly for people who may be worried about going to the hospital and risking contracting Covid-19.

    "Being able to go into a retail environment closer to home, a smaller facility, felt safer and more convenient and also felt newer and cleaner," said Matthew Coursen, an executive managing director at JLL, a commercial real estate services company.

    Landlords who were hit by store closures during the pandemic may also be interested in working with health care providers because they are well-funded and typically sign long-term leases.

    "As the landlord thinks about what will happen if we ever go through a crisis again, they want things that won't close—grocery stores, pharmacies, and medical facilities," Scardina said.

    In addition, some landlords are now targeting health care providers as they build new properties.

    "I do go after them now," said Dotan Zuckerman, a consultant who handles retail leasing for ground-up mixed-use developments in the Southeast. "In a lot of these big projects, there's only so much food and beverage you can do." (Margolies, New York Times, 2/22)

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