Bringing Health Care to Retail Centers

In the face of escalating hospital costs, reduced federal reimbursements, and a shift towards localized care, the dynamics of health care delivery are undergoing a profound transformation. This shift opens up a unique opportunity for builders and developers to repurpose former hospital structures, giving rise to ambulatory care centers, outpatient facilities, and medical malls across the nation.

The convergence of health care with retail spaces, particularly in American shopping malls, is reshaping the industry. As e-commerce challenges retailers, an increasing 38% of urgent care centers find their home in shopping centers, according to a 2014 survey by the Urgent Care Association of America.

Converting retail space into health care facilities demands substantial renovations, transforming large spaces into reception areas, examination rooms, waiting zones, and doctors' offices. Real estate players entering this arena must possess specialized knowledge of medical office buildings, considering unique design aspects such as ceiling heights, office-specific amenities, enhanced power supply for medical equipment, and dedicated areas for each medical office. This distinctive landscape, unlike traditional large office spaces, requires a nuanced approach and connections through different brokers to attract potential medical tenants.

Builders and developers should also monitor situations where hospitals are closing down, presenting opportunities to sell land for redevelopment. A prime example is the former St. Vincent’s property in Manhattan, now a luxury residential space with an adjacent ambulatory care center. With hospitals merging into larger systems and smaller institutions being replaced by user-friendly "satellites," the accessibility and less intimidating nature of these facilities improve overall care quality. This trend creates prospects, especially as financially robust health care systems display a willingness to engage in long-term leases.

Hospitals, primarily focused on delivering health care, can draw inspiration from successful companies in other industries. A notable example is Marriott's separation of its hotel management and franchise business, shedding real estate debt from its management arm. Hospitals with strong credit profiles become attractive to developers willing to construct outpatient centers and ambulatory care facilities designed for long-term tenants.

The evolving landscape of health care, emphasizing local settings, offers significant opportunities to repurpose existing properties and construct innovative facilities. Construction executives must remain vigilant about these transformations to capitalize on emerging trends in health care delivery.